Pre-Qualified vs. Pre-Approved

Nothing says disappointment like submitting an offer on a home only to find out later that your financing is not in place. Here is a quick overview of the differences between a pre-qualification, pre-approval and approval.

Pre-Qualified

-Household income revised

-Down payment revised

-Debt ratios examined

-Credit bureaus are usually not pulled.

This is a very quick overview of the applicant’s credit worthiness. Banks have been known to pre-qualify applicants to speed up the process.

Pre-Approved

-Household income revised

-Down payment revised

-Debt ratios examined

-Credit bureaus ARE pulled

-Rate guarantee can be obtained (usually for 2 to 6 months)

The big thing here is finding out the credit scores/worthiness of the applicant(s). Process takes longer than a pre-qualification.

Approval (mortgage commitment issued from Lender)

-Household income revised in detail

-Down payment revised in detail

-Debt ratios examined and confirmed

-Credit bureaus ARE pulled (if not done so already)

-Details of mortgage confirmed (Loan Amount, Rate, Term, Amortization, Type)

-Lender commences underwriting process

-Lender validates property

After an Approval has been issued

A condition of the commitment may request an Appraisal (this applies to most conventional mortgages and also applies to most non-MLS listed properties)

A condition of the commitment may request more income verification (eg. A teacher who disclosed that they were full-time permanent is actually on contract and may be requested to supply 2 years Notice Of Assessments)

All documentation presented is examined by Lender

Lender will contact employer(s) of applicant(s) to validate employment

Lender finishes underwriting process and instructs solicitor

Loan is advanced upon satisfying ALL lender conditions outlined in the mortgage commitment

The approval process is quite in-depth. The conditions on the commitment have to be met to receive funding. Although not common, deals can fall apart AFTER an approval has been issued due to applicants withholding information or appraisals not holding the value of the subject property.