By Lynette Kaichen, Senior Loan Originator NMLS # 131801, Blue Water Mortgage Corporation NMLS #1291

Lynette

 

 

To find out more, or to get started, contact Lynette Kaichen at Blue Water Mortgage at 603-758-1659 or lynette@bluewatermtg.com.  Or, apply online at www.lynettekaichen.com

 

Pre-Qualified vs. Pre-Approved?  What is the difference?

While beginning the home-buying process, the terminology can be confusing.  Often there are many terms that seem interchangeable – Hazard Insurance is also called Homeowners Insurance, the Purchase and Sales Agreement is also referred to as the Purchase Contract….well you get the idea!  Confusing!

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Another confusing example is becoming “pre-qualified” for a home loan vs. being “pre-approved”.  One large factor adding to the confusion between these terms is a recent change in how the Federal Regulations have changed to differentiate between these terms.  In prior years, a “pre-qualification” simply meant you had talked to a mortgage lender and you had talked hypothetical numbers.  They more than likely had not checked your credit report, and you had not provided them with any documentation to substantiate the income or asset information you had provided verbally.  Most of these were done over the phone or by internet.  At that same time, a “preapproval” meant your lender had fully reviewed your credit report and you had provided them with a full documentation package including 2 years of income information, asset information, and your scenario had been run through an Automated Underwriting System.  At this stage you may or may not have had a specific property address in mind, but you could begin house-hunting knowing exactly which loan program you would be going for once a property was identified.

For a lender to determine the loan type and amount a person would qualify for, they need to fully investigate 4 major areas:  Credit, Income, Assets, and Property.  Therefore, as the lending market continues to change, Federal Regulation has now suggested you must have an exact property address before a “pre-approval” can be issued.  Because the property is the missing piece of the puzzle, all other mortgage inquiries, no matter how thorough, should be referred to as a “pre-qualification”.  As a result, now more than ever it has become extremely important to work with a lender who does a complete check right from the beginning.  Be careful to choose a lender who has a track record of excellent customer service and ability to get the final loan approved.

Why is this important?  A true pre-qualification letter is like a “pre-approval” on YOU as the buyer. It tells the seller you are Ready, Willing, and Able to buy their home!  And, it ensures you can act fast if needed (the lender already has your personal paperwork on file).

determine-which-location-is-best-when-buying-a-homeA pre-qualification letter also allows you, as the buyer, to discuss specific mortgage options with your mortgage lender.  Such as, what is the minimum down payment?  What should I expect for closing costs? How much payment can I afford?  What price range should I be looking in?  The answer to all of these questions will vary greatly depending on the information collected from your credit report and your income and asset position.

The pre-qualification process will likely only take between 24 to 48 hours. And your pre-qualification letter will typically last for 60 to 90 days.  To find out more, or to get started, contact Lynette Kaichen at Blue Water Mortgage at 603-758-1659 or lynette@bluewatermtg.com.  Or, apply online at www.lynettekaichen.com

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