When you are buying a home, you will talk with a loan officer and get an approval….but is it really an approval or just a pre-qualification? Your real estate agent will want an approval letter when you write a purchase agreement. You need to make sure you are really getting an approval.
The difference between an approval and a pre-qualification is what the loan officer does with the information you give them. If the LO just asks for information over the phone and doesn't get the information they need to pull a credit report and verify income, it is just a pre-qualification. A pre-qualification can sound like an approval. The loan officer may go over all the different programs, what your payments would be, how much money you might need at closing and possibly figure out based on what information you give them, how much you would be qualified for. It may sound like you are approved, they may even send you a loan summary or a breakdown of fees. They may even send you a pre-qualification letter. It gives you a good idea of how much you might be able to spend, but it's not an approval letter.
A loan approval means you have given the loan officer several pieces of information. You have given them the information to pull your credit report and they have done that. They have your payroll information (paystubs, w-2's, etc) so they can verify the income that you have. They have bank statements to know how much money you have available for closing. The loan officer will run your file through an underwriting system and get an approval. Once they have done that, you are actually approved for your mortgage. You still will need to provide more information but that gives you a better feeling that your mortgage will be approved by the final underwriter right before closing.
If you just give your loan officer verbal information, it may not be the same and you may end up not qualifying for the same amount. I have had clients tell me their income, but when I actually see the documentation, it is not the same. Maybe there are deductions on your tax returns that you didn't tell your loan officer about. There may be deposits on your bank statements that we need to verify – there may be withdrawals on your bank statement for a loan that isn't on your credit report.
Make sure that you are giving the loan officer the information so you can be more confident that your loan will be approved. These days we need more information than we used to – we also want more letters of explanations and documentation than ever before! One of these days it will ease up a little, but until then, know that your loan officer will ask for information that you may think is crazy, but that's the mortgage business these days!!!
Leslie Vanderwerf, NMLS ID#335509, Summit Mortgage - Email – Website
