Ever wondered what the difference is between being pre-approved and being pre-qualified. Let's spell it out.
A pre-qualification is quick and easy. It starts the process of discovering a buyer's purchase power and usually begins with a phone call to discuss income and employment, credit and liabilities, assets and desired payments. Sometimes credit is reviewed to determine credit scores, however based on the info provided, a "would be buyer" can become pre-qualified fairly quickly.
A pre-approval starts much the same way, however, if done properly involves much more thorough collection and review of income documentation:
Credit is run to determine the borrower's credit scores and liabilities to ensure they meet guidelines. Automated approvals will be run in most cases to further determine a borrower's eligibility. Lastly, the completed file will be reviewed by proper staff members to ensure compliance and eligibility with lending guidelines at which time a formal pre-approval may be issued.
Neither is necessarily a sure bet and often leaves realtors wondering how legit the pre-qual is. They might even request the Automated Underwriting System (AUS) to help determine the validity of ones assets, income and credit. But if the AUS info is not reviewed and validated it's possible to get an approval based upon bad info that will result in the file being turned down during the underwriting process which typically happens much later in the process.
Don't derail it now by doing any of the following:
Discuss with Joe Mortgage prior to doing any of the above. This will ensure your loan proceeds as intended.