A pre-qualification letter is an unverified, free test run of the loan application process. The lender will use your income, monthly debts, credit history and asset information as well as electronic credit reporting to verify your credit worthiness and estimate what you can afford for a mortgage payment.
A pre-approval letter is a firmer commitment by the mortgage lender based upon a complete application with a fee, credit check and employment verification.
A pre-approval letter says that a mortgage loan is approved for a certain amount of money for a certain amount of time, which is subject to an appraisal of the property.
If a pre-approval letter is required in your offer to purchase, the offer should clearly state what is needed and in what form. Because a pre-approval letter might be mistaken for a loan commitment, which will waive your financing contingency, your lender should indicate in your pre-approval letter that it is not a loan commitment.
You can see their are 3 levels that you’ll go through to complete the purchase of your next Wisconsin Rapids home.
First, a pre-qualification letter lets you know where you stand and is a guideline you can use to know how much home you can afford.
Next, a pre-approval letter is a more thorough evaluation of your credit and income. The pre-approval letter is guaranteed for a specific amount of time for up to a specific dollar amount and interest rate.
Lastly, a loan committment signifies that the financing contingency has been met and that financing will not hold up the closing on your new home.
Thanks to Wisconsin Real Estate Magazine
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My name is Adam Holberg and I’m a Realtor with First Weber of Wisconsin Rapids. This website is designed to inform and help bring conversation to a topic I love, real estate.