3 Different Types of Mortgage Approvals for All Buyers To Be Aware of

I Like to talk to you about the differences between a pre-qualification, Pre approval and credit approval and what you need to do right now to put yourself ahead of the competition.  

My name is Mike Akkus, team leader of the Akkus Group. Let’s get into it! 

#1 Pre Qualification: which is the least vetted process, and the one I highly recommend you DO NOT do when you start your search for a home. Pre qualification is only a discussion between the lender and the buyer. Based on the information buyer tells the lender without giving any documentation or running credit. This is a waste of time for you, the buyer and the Real estate agent that’s spending hours and hours of time with you showing you homes. Imagine a scenario where after months of searching for a home and you find one you really love, they apply for a mortgage and find out you don’t qualify because of your income, or your credit is too low and you need credit repair! As silly as this sounds it happens more than you think! I’ve been there early in my real estate career. So please DO NOT get a pre Qualification! 

#2. Pre Approval: This is the most common and at the very least the process buyers need to go through before looking for a home. The pre approval process is you going online to fill out a loan application accompanied by pay stubs, tax returns, bank statements and running your credit. By doing this the lender has everything they need to confidently issue you a pre-approval. In this scenario they run you through processing and underwriting only after you find a home and you are under contract on it.

#3 Credit Approval: This is the least common process, but it's the best form of approval a buyer can apply for before house hunting. It’s funny how that works, the best approval a buyer can apply for, but they don’t do it. There are 2 potential reasons that I can think of when it comes to a buyer not going this route. The lender doesn’t offer it because they don't want to scare buyers, or the real estate agent they are working with doesn’t explain the massive benefit of doing this or they just don’t know about it! A credit approval is the same process as the pre-approval but taking it one step further! That one step is having the lender run you through processing and underwriting which is typically done when you are under contract on a home when doing the pre approval route. What this means is you now have a mortgage in hand and all you need to do is find a home, do a home inspection, appraisal and that's it! This type of approval is as good as a cash buyer, you can now waive mortgage contingency and can close as quickly as a cash buyer! 

Now lets recap this, 

Pre-qualification is based on a conversation of trust. No documentation. 

Pre-approval is filling out an online application and handing in docs to support it. No processing or underwriting is done. 

Credit Approval: Same as a pre approval but taking it one step further. Go through underwriting and processing and have the mortgage approved. Good as cash! 

So I highly recommend every buyer to go through credit approval, this will put you in a great position to win when up against other buyers bidding on a home.  


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