If you read our “How to Shop for a Home Mortgage” and “Mortgage Broker, Banker or Portfolio Lender” blog posts, you might be wondering, “What’s the difference between being pre-qualified, pre-approved and fully-underwritten?” The answer can impact you when it comes to getting your offer accepted – or not. Before we get into the differences – let’s start with why it’s so important.
Why Get Pre-Qualified, Pre-Approved or Fully-Underwritten?
- You’ll waste time and emotional energy looking at homes that aren’t a realistic fit unless you know what you qualify for. In a hot market, loss of time could cause you to lose your dream home.
- Your Real Estate Broker needs to know your budget in order to find potential properties for you. Touring properties without a budget is a waste of your time and money.
- A seller won’t consider your offer without knowing that you qualify to purchase their home.
- In the current market climate, most listings are getting multiple offers. Your offer won’t be the winning offer without a letter from your lender…. Unless you have cash and proof of the funds to close!
What is Pre-Qualified?
Pre-qualified is the first step you take on the journey to getting a home loan (mortgage). Your lender will gather some basic details from you; debt, income, assets, and form an idea of your finances. After review, your lender can estimate what you might qualify for. Getting pre-qualified doesn’t cost you, and it can often be done online or by phone. However, pre-qualification provides you with an amount you MIGHT qualify for, not a guarantee that you will be approved. After all, no credit check or employment verification is done to “pre-qualify”. Once you are pre-qualified, you can begin to look at what is available in the housing market. But, continue working with your lender to get pre-approved before you make any offers.
What is Pre-Approved?
To become pre-approved, you will need to take the following steps:
- Fill out a mortgage loan application
- Provide your lender with the documentation necessary to confirm your finances
- Complete a credit check
Your lender will confirm your information and put your file through a desktop underwrite (computer automated approval). If approved, you will be provided with the dollar amount you qualify for, along with an expected interest rate. Your lender is now able to write you a pre-approval letter stating your exact loan amount. With this in hand, you are ready to start looking for a home at or below your pre-approved amount. Since you are further through the financing process, you now have an advantage when making an offer. You’ll be able to move faster than other buyers you might be competing against, but don’t stop here….
What is Fully-Underwritten?
Once your lender receives and verifies the documents listed above, it must go to the lender’s underwriter for review. The underwriter will manually underwrite your loan to get fully-underwritten approval. Taking this extra step assures a seller that you have the ability to close the transaction quickly. Also, if you are up against another offer in a multi-offer situation, being fully-underwritten gives you the best advantage. As soon as you complete these steps, your loan will be marked “clear to close”:
- Provide the lender with your purchase and sales agreement
- Conduct your inspection
- Review the title
- Receive the appraisal report
- Final verification of all documents
Congrats! Your home loan is fully-underwritten and only steps away from being issued.
Are you ready to start looking for your new home? Get in touch with us. We are happy to answer any questions you have and help you get into your new home.