Are you pre-qualified or pre-approved for a loan?
Before you begin to shop for a new home, you should set up a time to meet with me so we can figure out how much you can afford.  The best way to begin is with a simple telephone interview, which will typically take 15 to 20 minutes.  This will you to determine if I am the right person to help you, and for me to determine what your basic goals are.  This will put you in a better position as a buyer.  That's when it is important to understand the distinction between being pre-qualified for a loan and pre-approved for a loan.  The difference between the two terms will be crucial when you decide to make an offer on a house.

To get pre-qualified for a loan, I will collect information about your debt, income, and assets.  Well look at your credit profile and assess goals for a down payment and get an idea of different loan programs that would work for you.  I will issue you a pre-qualification letter indicating the amount you are pre-qualified to borrow.

It is important to understand that a pre-qualification letter is just an estimate of what you are eligible to borrow, not a commitment to lend.  A better and more powerul solution is to get pre-approved.  Getting pre-approved for a loan gives you competitive advantage when the time comes to bid on a home because you are approved for a loan at a specified amount.

To get pre-approved, we will take the the same basic information gathered for the pre-qualification and complete a mortgage loan application.  We will then ask you to provide me with various information verifying your employment, assets and financial status such as tax returns, W-2 forms, bank statements and debt information.  We will review your mortgage options and submit your application to the lender that best meets your needs.  Once the application process is complete you will receive a pre-approval letter indicating the amount your lender is willing to lend you for your home.

A pre-approval letter is not binding on the lender, because it is still subject to a valid purchase contract and an appraisal of the home you wish to purchase and certain other conditions that you will know upfront.  If your financial situation changes (e.g. you lose your job), interest rates rise or a specified expiration date passes, your lender must review your situation and recalculate your mortgage amount accordingly to verify you still can be approved.