Many times buyers will ask me to explain the differences between pre-qualification and pre-approval and which one positions them better to get a San Diego Home Loan for their new home purchase. I will explain each one below and let you know which one, in the opinion of this San Diego Mortgage Broker, puts you in a better position.
What is a Pre-Qualification?
Pre−qualification can be the starting point in your search for a San Diego Home Loan. A pre-qualification is a quick snapshot of information that your San Diego Mortgage Broker will collect and includes income, existing debt, savings, and length of employment. Your mortgage broker will use this information to calculate a rough Debt to Income Ratio, amount of down payment available or needed, and the likelihood that you could qualify for a particular loan.
What is a Pre-Approval?
Obtaining a Pre−approval is a much more detailed process and therefore carries more weight with a Listing agent when trying to get your offer accepted. To start the pre-approval process you will complete an application. I give my clients the option to have a paper application emailed to them, use a secure online application, or complete the application over the phone. This information will help your mortgage broker determine which loan program will be best suited for your San Diego Home Loan.
In addition, you will supply your San Diego Mortgage Broker a copy of your paystubs and bank statements. If you are self-employed or own other rental properties, you will also need to supply tax returns. Your mortgage broker will also pull a credit report. Once all this information is collected an analysis will be done to accurately calculate your debt to income ratio and loan to value.
Your completed file will be processed through an automated underwriting system which confirms that you are pre-approved based on the guidelines for the loan program you chose. At this point, your San Diego Mortgage Broker can provide a written pre-approval letter for you or your agent to use in support of your purchase offer.
As you can see from the steps involved, a pre-approval is a more in-depth analysis of your financial situation than a pre-qualification and more often than not foreshadows what an underwriter will decide as well. That’s not to say that loans that were pre-approved don’t sometimes get denied by the underwriter, but it greatly decreases that chance.
With a pre−approval in hand, you now have more power to negotiate. The seller and listing agent will take your offer much more seriously knowing you are already pre-approved by a lender. Being pre−approved can also save up to a week in the loan process while in escrow versus having to start from scratch once your purchase offer is accepted.
If you would like to take advantage of the benefits of being pre-approved you can click HERE to fill out the secure online application, or feel free to give me a call at 858-519-3935 to discuss your scenario. I am usually able to complete pre-approvals within 48 hours and would love a chance to show you first hand our superior customer service and competitive San Diego Mortgage Rates.