What is the Difference between Prequalification and Preapproval?
September 16th, 2007categories: Chico Buyers, Chico Financing
The difference between a pre qualification and a preapproval, my friend, would be like buying a discount store handbag vs. a Prada or Gucci handbag.
A prequalification is a very preliminary estimate of how much you can afford to pay for a Chico California home. The lender will base his opinion on the information you provide. However, your credit and employment information typically aren’t validated for prequalification, so the results can only be considered a rough idea of what size payment, and what type of loan you might qualify for. Please be forewarned that prequalification letters are not often highly regarded by people “in the know”. All too often, a lender is unable to get the final loan approved, despite the fact that he or she has issued a prequalification letter to his unsuspecting buyer. The more reputable and educated the lender, the better the chance that the pre qualification letter is a valuable step in the process.
Still, a prequalification letter can be a useful tool until you have the opportunity to substantiate your information. Like the discount handbag, it will get you by for a while!
A preapproval is a written commitment from a lender or mortgage broker to finance your home purchase up to a specific amount. This indicates that the lender has scrutinized your financial history including employment verification, rental history, credit reports, pay stubs, W-2’s, tax returns, etc. Preapproval indicates to sellers that you are a pre-screened, serious home buyer. Once you have obtained a preapproval, you can shop with confidence, knowing that your odds of obtaining your desired loan are good.
**It’s important to note that neither a prequalification or preapproval letter is a guarantee that you will be given the loan. Even with the preapproval, there are certain details like a finalized sales contract, inspections, and appraisals that must come into play prior to the bank’s funding your new loan.
Don’t hesitate to give me a call if you’re ready to take that all important, first step to becoming a homeowner: getting prequalified. You will surprised at how quick and painless it is!! It would be my pleasure to match you to a lender, one that both you and I can trust to provide you with the information you need to get you on your way to buying Chico California real estate! I can be reached at 530-864-5407.
All important, related must reads!
WHY Should I Get Preapproved for a Chico, CA Home?
Like what you’re reading?
Click here to SUBSCRIBE to Chico CA Real Estate Blog and MLS Search
Sandi,
With what has happened in the mortgage industry in California as of late, most lenders are changing the way they do business. One of the major players for “A” and “Alt A” loans in Sacramento came out with guideline changes today that ALL loans sumbitted to them would have to come through their automated system and have Fannie Mae DO/DU or Freddie Mac Loan Prospector (LP) approval. This is going to reduce risk to the lenders and brokers alike. The days of Realtors and Sellers accepting a “pre-qualification” letter I think are numbered as they are not worth the paper they are written on. I have always preferred running a client’s loan scenario through one of the automated search engines and getting an immediate approval or non-approval. This was a very informative post you wrote.
Ken
Blog Hopper…
Hi There. I’m blog hopping….