Wednesday, September 30, 2009

Mortgage Loan Pre Qualify vs. Mortgage Loan Pre Approval: Part 1 Mortgage Loan Pre Qualify

Being pre qualified for a home mortgage (or getting a pre qual as most mortgage professionals like to call it) really isn't much of a process or carries the weight most mortgage borrowers seem to think. Pre qualify is basically nothing more than an informal review of the borrowers' financial condition. In a face to face interview a loan officer will ask some basic questions regarding a borrower's financial situation. Things like place of employment, income, length of employment etc. are discussed. Usually there is no written verification or documentation of the information that is provided. Based on the information the borrower supplies, the lender's employee provides an estimate of what he or she thinks the borrower will qualify for. Should the estimate be reduced to writing, then a letter of pre qualification or a pre qual letter is issued. The entire mortgage loan prequalification process may be over in as little as five minutes and often times handled over the phone.

As the above description illustrated there really isn't a whole lot of information or documentation to back up the home mortgage lenders good faith estimate and absolutely nothing binding about the opinion even if it's been reduced to writing. But it does show realtors and home sellers that the prospective home purchaser is at least a little further along in the home buying process, than the typical tire kicking no better way to spend a Sunday than waste people's time, not really serious home buyer.

But how much further along in the process are home buyers that get prequalified. Let's say they go out and find the perfect home and it priced within the confines that the loan officer said was acceptable. When an offer is formally submitted on the dream home, it's discovered that the financial information that was used to prequalify the home shopper needs to be verified by other means. And that it isn't as simple a matter as previously thought. Or that the borrower really hasn't been at the job two years. It's more like eighteen months. It's not difficult to see the fallacy of thinking that a home loan prequel carries much weight.

Actually, they really aren't worth the paper they usually aren't written on. Most real estate agents realize this fact and advise serious home shoppers to take the time and get pre approved for a mortgage loan. With a pre qualification a lender really doesn't have a commitment to lend a borrower anything. Serious home buyers need to show their borrowing strength and their lender has a commitment to lend them what is needed. This is something that a home mortgage pre qualification was never meant to do.