What is the difference between pre-qualification and preapproval of a client for a mortgage loan? If you are starting the process of buying a new home, one of the first steps you will hear you need to take is to get a pre-qualification letter from your lender. It’s important that you understand what that is and what it isn’t. It is an assurance to your agent and a seller that you have gone to a lender or mortgage broker and started the process of applying for a loan. That process, when done by an honest loan originator, involves you completing a loan application and having your credit report pulled and examined. Taking your information along with an understanding the programs available, your loan originator should then be able to tell you the amount of loan money for which you should be able to qualify. Taking the loan amount, plus the cash you have for paying a down payment, less the estimated closing costs, results in the total amount you could offer to pay for a house. The loan originator produces a pre-qualification letter that you take with you when you begin your search. The letter gives your agent somewhat of an assurance that you are a qualified buyer and will be able to complete a contract on a house within a certain price range. When you make an offer, your pre-qualification letter also helps the listing agent assure the seller of your offer.

There’s a saying among realtors however that a “pre-qual” letter is actually useless even though it is usually required to begin the buying process. The reason being that it is under the assumption that all the information obtained is true and accurate. This is where we come to what it is not.

It is not an approval for a loan or even a pre-approval. In the loan process, the final approval for a loan by a lender often doesn’t happen until a day or so before closing. That is because though the originator has collected information from the borrower, all that information must be proven to be true and accurate for that borrower. You will most certainly hear your loan originator ask you for documents that can be submitted to the underwriter who basically is going to prove the truth of your loan application. But you are only one part of several that must be approved. The contract must be examined for approval, the house must pass approval by appraisal, and the title must pass approval through a title examination. If an inspection requires remedies, they must be met for approval as well. Without getting too detailed here, every lender has their own set of guidelines or conditions for each program they offer that must be met including all of these elements. Obtaining a loan approval usually takes from three to five weeks depending on the documents required, a process designed for one purpose: to approve you, the agreement and your house for a loan. Approval of the loan only occurs when all the conditions are met and the underwriter gives the go ahead to close. That’s why you will never obtain a loan approval letter before you start your search for a house. Don’t look for it and don’t believe a lender who says they can give it.

Before you start your search, email me a request to be pre-qualified for a loan. I will get you started in the process and work with you to have most of the document collecting and submission to underwriting taken care of while we find you the house of your dreams. I’m a professional. I’m licensed and registered both as a realtor and as a mortgage broker because I believe in being honest and straight forward with my clients, protecting you by educating you in the process, rather than preying on ignorance. Since I want your referrals even more than just a “deal,” I purposely protect you from surprises at the closing table. Let me help you with your next loan and your next home.

Who Do You Believe?

Whether you are a home owner wanting to sell or needing to refinance, or a “wanna be” home owner, it is very hard to know who to listen to…(Sorry that should be “to whom you should listen”…but it is my first blog). Who do you believe? The problem lies not in the sources for information but in the many different situations in which each individual finds his or herself. The advice for a homeowner in Aurora may not fit one in Greenwood Village. The same is true for the condo owner and the houseowner, or even a townhouse owner. You cannot listen to the national statistics and assume they represent the Denver Metro area because we didn’t experience the same housing ”bubble bust” as other areas. You also don’t want to take the national reports on mortgages and assume that applies to our lending picture here in Colorado. So if you can’t trust the media’s reports, who can you get reliable trustworthy information on your neighborhood and situation from? That’s the very reason why I’ve begun this blog.  As a realtor it is my responsibility to spend most of my days staying informed about our markets here in Denver. And as a registered mortgage broker, I also have to know how to get solutions for refinancing and home buyers. From what I see right now, one size answers do not fit anyone. Each situation will take an individualized solution. And the good news is there are good solutions out there for every situation. If you’ve been discouraged by “news” about our market, please write and tell me your situation and I’ll tell you what I know and connect you with the right solution for you. Blessings, Sharon

Welcome to Sharon Mahoney’s Blog! This blog will provide you with valuable information, tips, and general insight into the real estate market in the Denver Metro area.