Are you really pre-approved? The term “Pre-Approval” is used very loosely in the mortgage and real estate industry. Chris Reese, California Mortgage Hero & Certified Mortgage Planner explains what a pre-approval really is and how to get one.
It’s very important that you understand the distinction between a pre-approval and a pre-qualification. What you need is a pre-approval but many people will call and refer to a pre-qualification as a pre-approval but they are quite different. When you’re shopping for a home to live in, a 2nd home/vacation home, or looking for an investment property you’re going to need a solid pre-approval letter from a competent loan professional, preferably a Certified Mortgage Planning Specialist.
Let’s explain what a pre-approval actually is. It’s a thorough analysis of a loan applicant’s income, assets, credit, and ability to repay the loan. It can sometimes be very quick and sometimes borrowers have very complicated situations that require a longer more thorough analysis to determine if they can borrow the money to buy or refinance a real estate property. This means that the borrower will complete an application providing all their personal and financial information including social security numbers & dates of birth. The applicant’s credit will be pulled and thoroughly examined for payment history to creditors, number of accounts, collections, public records, erroneous information, red flags etc…
The applicant’s will also submit documentation to support what the information in the loan application. Income will be calculated according to the guidelines of the particular type of loan the borrower is applying for. Even ID’s are checked to verify an applicant’s information but also to ensure that the forms of identification are valid and not expired. I know that this sounds like a painstaking process but its quite necessary to ensure that you can truly qualify for the loan you’re applying for. The last thing anybody wants is for a borrower to not be fully pre-approved and then during the escrow period the loan get’s denied. This costs the agents their time and energy and expenses that go with being an agent. More importantly it costs the borrower time and money for inspections and quite possibly their deposit money. The worst part though, the borrower doesn’t get the house and they are typically heart broken at this point! Don’t let this be you!
Now that I’ve explained what a real pre-approval is I can easily explain what a pre-qualification is. Anything less than what I’ve described above is only a pre-qualification and can really leave you hung out to dr. A pre-qualification can involve anything from just verbally asking a potential borrower what their income is and how their credit looks all the way to just shy of 1 or 2 of the steps I illustrated above. So why would anybody do only a pre-qualification? Simple, two reasons: Inexperience and Time/Money! Inexperienced loan officers that just play the numbers game and don’t have any real advisory relationship to their clients. This is why I always recommend a Certified Mortgage Planner as they typically always go the extra mile and also have the experience and take an advisory role.
If you’re looking to purchase a home or investment property or you’re simply just looking to refinance it, do yourself a favor and pick up the phone and give me a call. As a Certified Mortgage Planning Specialist I’ll personally analyze your situation and use an appropriate mortgage planning strategy that helps you accomplish exactly that. You can reach me, Chris Reese, The California Mortgage hero at 916-502-1656 and you can apply online at http://www.sacramentohomeloanspecialist.com/applyNow.html
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