Tuesday, September 25, 2007

What is the difference between being prequalified and preapproved for a loan?

Prequalify: the first stage of a mortgage application where the lender will run a basic credit report and determine your debt to income ratio in order to see how much of a mortgage you qualify for.
Preapproval: The result of a borrower completing the application process; once the loan has been approved by an underwriter the borrower is preapproved. Preapproval can only take place prior to the borrower looking for a home (after a home is under contract, this process is considered loan approval). Preapproval is always subject to the property appraising as well as property type approval, and there are typically additional conditions imposed by the underwriter. Preapproval means that the borrower can shop for a home with confidence, knowing that they are approved (subject to any conditions) for the financing.