Three Levels of Home Loan Approval

Most homebuyers need to get a loan from a mortgage lender in order to fund the purchase of a home. They’ll want to work with a lender to get “pre-approved” for a loan prior to searching for a home, so they know the amount they are qualified to afford. What many people don’t know is that there are different levels of loan approval, and some are stronger than others!

Pre-qualified

To become pre-qualified for a home loan, you’ll give a mortgage lender a basic overview of your finances, income, and debts. They will use this information to give you a rough estimate of the maximum home loan amount you qualify for. You’re simply stating things, not proving them. The lender doesn’t look at your credit report or verify any info in the pre-qualification stage, so it carries very little weight.

Pre-approved

In order to get pre-approved, you’ll have to fill out an actual mortgage application. At this point you will provide your lender with documentation proving your income and assets, and they will pull your credit. They can then approve you for a more specific loan amount. Many sellers want to see a potential buyer’s pre-approval letter from a lender, as it gives them more confidence in the buyer’s ability to purchase the home.

Note: Your final loan approval is typically still dependent upon a successful completion of the full underwriting process.

Pre-underwritten

This is the golden standard of loan approval because it is a guarantee that you will receive a loan. No matter what, at some point a loan underwriter will go a step further than the lender and closely review your file in order to evaluate the risk associated with granting you a loan. They will either reject your application or (hopefully) sign a commitment to give you the loan. If you’re pre-underwritten, it just means this in-depth examination happened upfront.

In competitive markets, completing this extra step may give you an edge over other buyers!

———

If you have questions about the home loan process and/or would like to be connected to a reputable local lender that you can trust, feel free to contact me. I am happy to help!

Sorelle Hardin | Residential Broker
Windermere Real Estate Co.
sorelle@windermere.com
253-720-5580