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Loan Approvals

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There are 2 types of lender approval letters and you need to know the difference

Pre-qualification: This is an informal and the most common way most lenders use to show you how much you may be able to borrow. You can be pre-qualified over the phone without filling out any paperwork simply by telling a lender your income, your debts, and how much of a down payment you can make. This can be very helpful in determining the amount of payment you are comfortable with and how much of a loan you may be qualified for. Pre-qualifications are not lender commitments. They have not been approved by the lenders under-writing department and they are subject to market interest rate fluctuations and documentation of all information you verbally provided to the lender.

Pre-approval: This is a commitment from a lender to lend you a stated amount of money based on stated conditions*. It involves assembling your financial records and verifications (without a subject property and without a purchase contract) and going through a preliminary approval process, usually reviewed or signed off by an underwriter. Pre-approval gives you a more accurate picture of what you can afford and demonstrates to a sellers that you are serious about buying. Pre-approved loans, on average, tend to close with fewer problems and on time. Pre-approvals are subject to market interest rate fluctuations and interest rates cannot be locked until you have an accepted contract to purchase a property.

*Stated Conditions: normally, are subject to the lenders approval of an accepted and fully executed sale contract, an acceptable preliminary title report and appraisal of subject property.

Be aware of the fact it has become a lending industry practice to issue pre-qualification under the heading of a pre-approval letter. As you can see they are not the same and do not give you, the consumer, the same degree of security. Most direct lenders (BofA, Wells Fargo, Chase and others) have the ability to provide you with a real pre-approval letter. Now that you know the difference you won’t let a lender mislead you into costly mistakes.

Get your Credit History
Equifax, Trans Union, and Experian are the three major Credit Reporting Companies. Getting a copy of your credit report is as simple as calling and requesting one. When you receive your credit report verify that it is accurate. Get copies from all three companies to assure there are no mistakes. Some lenders will use a minimum of two credit reports and many use all three. You may contact the different credit reporting companies at the numbers listed below.

Experian 1-888-397-3742
Equifax 1-800-685-1111
Trans Union 1-800-916-8800