June 9, 2017
Sometimes the mortgage industry throws around terms without
fully explaining what they mean. And on behalf of all mortgage companies
everywhere, we apologize. When loan officers speak with clients sometimes they
talk as though they’re speaking with a colleague in the business who
understands the unique terms lenders use on a regular basis. One of these terms
is “pre-approval.” When your lender sends you a pre-approval letter, what,
exactly, does it mean? Is it the same thing as pre-qualify?
To a point, pre-approval and pre-qualify are the same but not
by very much. With a pre-qualification it means you’ve had an in-depth
conversation with a loan officer about how much you might qualify for based
upon current market rates. You’ll tell the loan officer how much you make each
month, where you work and for how long, talk about your credit history as well
as letting you know about how much down payment you will need as well as about
how much your closing costs will be. But with a pre-qualification, none of that
is verified. It’s the result of a conversation. Your loan officer won’t pull a
credit report or request pay stubs but essentially work with what you told the
When you’re pre-approved, the loan officer has taken the
extra steps needed to verify the important aspects of your loan application. A
pre-approval letter is issued to you stating what was verified typically
This verification is supplied by reviewing recent pay check
stubs showing gross monthly income or if someone is self-employed the loan
office will review your two most recent federal income tax returns. The lender
will make sure you’ve been employed for at least two years. Your credit report
will be pulled along with credit scores and finally to make sure there are
enough available funds to close you’ll provide copies of recent bank
When you make an offer on a home the sellers will ask to see
your pre-approval letter. This lets the sellers know that not only are you
serious about buying a home but you have already applied for financing and all
you need is a property address. That’s what it means when you’re pre-approved.
For more information or questions about mortgage loans, please call (855) 757-8748.
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