Pre-Approval and Pre-Qualification
Information for First Time Home Buyers in the South Bay
Is pre-approval a general endorsement by a bank?
No, when
you are pre-approved, it is for a specific loan program from
a specific lender. Not all lenders offer all loan programs.
You may need to get approved with a different lender or for
a different loan program with the same lender, depending on
your financing options at the time you buy a house. Check
with the agent or broker who helped you gain loan pre-approval
before you write an offer. If you think you will need to get
re-approved for a loan, make sure to allow enough time for
this in the purchase contract.
Is
the pre-qualification a guarantee that I will get the loan?
No. The
lender or mortgage broker is under no obligation to grant
you a loan. Most pre-qualification letters state that a buyer
appears to be qualified for a certain loan amount. There is
usually a disclaimer to protect the lender or broker in case
you fail to qualify. Before a lender will actually loan money,
you must complete a loan application.
Is
there anything official about a pre-qualification?
No, loan
pre-qualification is an informal process. After a review of
your financial status, a loan agent or broker will issue a
letter stating that if the information provided is accurate
you should be able to qualify for a loan of a certain amount.
Often, these letters are form letters. Even if a pre-qualification
letter is personalized, it usually contains disclaimers to
protect the loan agent. Consequently, some real estate agents
feel that pre-qualification letters are worth little more
than the paper they're written on.
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