The Mortgage Process: Difference Between Pre-Approval and Pre-Qualification
In today’s competitive real estate market and a tight lending environment, pre-approvals are more important than ever. Buyers and sellers need to understand the difference between a pre-qualification and a pre-approval.
Pre-Approval Letter vs Pre-Qualification
A pre-approval letter is typically accompanied by a written commitment from the credit officer who has underwritten the full financial package. There will be conditions, including but not limited to the full appraisal (excluding NJ) on the subject property, to the commitment letter that must be satisfied for the commitment to be binding.
A pre-qualification is a simple non-binding letter drawn up by a mortgage salesperson that states that they have reviewed the financial information and that the client should qualify for an approximate loan amount.
Buyers and sellers should be aware that just because a salesperson says that a potential borrower is a pre-qualified or pre-approved, each party should read the letters and approvals and speak to the person who has the authority to make that important underwriting decision.
What Documents Do You Need for a Mortgage Pre-Approval?
Typically, a mortgage lender will request the following documents for a mortgage pre-approval:
– Last two years of Federal Tax Returns (personal & business)
– Last two years W-2 statements
– Two most recent pay stubs
– Two most recent months bank/brokerage statements
– Copy of ID’s
How Long are Mortgage Pre-Approvals Good For?
Typically, mortgage pre-approvals are good for 60-90 days. Talk with your mortgage lender to learn more about mortgage pre-approvals and how long they are good for.
Why settle for a pre-qualification when GuardHill Mortgage can provide a fast pre-approval supported by a conditional commitment letter?