Do preapproved mean that you already have the loan or not?

In terms of a mortgage loan, pre-approved means you're approved for the loan "at a glance". It's not a scam. It's just part of the process. Before you shop for a house, you need to get pre-approved so you know which house you can afford to get a mortgage on. It wouldn't make any sense for a realtor to put your offer in (there's a lot of paperwork involved) only to find out after it was accepted that you have no chance of financing the property.

Ultimately, the amount you're pre-approved for is just an estimate (usually quite accurate) of what type and size loan you can secure. Being pre-approved does not mean you have the loan. Actually securing the loan is another process entirely and you'll go through that once your offer has been accepted by the seller.

Pre-approved in terms of a credit card application is something else. Often it is indeed a scam. The credit card companies review your credit score and decide whether or not to solicit you with a "pre-approved" application. Once you send that in, they will actually review your credit history, and often deny the card. The problem is, every time a potential lender checks your history, it knocks your credit score down a few points. So unless you're sure that you have stellar credit, throw the pre-approved credit card solicitations in the trash.

yes it is telling you exactly how much of a loan you have so you can get the right house

I'll deal with this as if it were a real estate related question as that is a common question in my industry.

You can be pre-approved with a lender for a home mortgage subject only to an acceptable termite clearance letter and an appraisal of the property that verifies the contract value as good. They also tell you the price range of home to shop for and anticipated payments based upon the mortgage amount you are pre-approved for.

When I take people in for a mortgage, I have them fill out a complete loan application. They take w-2 forms for the last 2 yrs or IRS forms if self employed for the last 3 yrs, and the last 2 pay stubs or a current P&L statement signed by their accountant. The lender proceeds to verify the credit, employment, debt, pull the tri-merged credit reports, issue the approval letter as I explained and then we go look for a home.

Anything less is not a true pre-approved loan. You should be given the conditional credit approval letter once you are approved. Insist that you want approval subject only to the termite clearance letter and appraisal, you will get it.

If you are buying a home I have listed, I will require a letter of credit approval subject only to an acceptable termite clearance letter and the appraisal equaling or exceeding the contract sale price value.

If the lender you are dealing with refuses to give you approval subject only to an acceptable termite letter and appraisal, find another, they are out there. That mortgage officer is just lazy, not wanting to work. You also need to be sure they have "IN HOUSE underwriting, NOT OUT-HOUSE underwriting. Just as it inplies out-house underwriting stinks, and the loan originator or processor has to go overboard to get the package ready to present to the investor that will be buying it for their approval. It delays the process and costs you money and possibly the sale.

I saw one out-house lender kill 7 deals in 2 days over underwriting. All 7 took their people to my lender and all 7 were approved using in-house underwriting and closed on time. They also saved fees by using a direct lender versus a mortgage broker.

Pre-approved is mostly confused with pre-qualified which is just seeing what your income qualifies you for, they have made no credit checks, no employment or credit verifications. Pre-qualified is not good enough, get per-approved like I laid out herein. The seller looks at you more seriously and his real estate agent starts to work somewhat for YOU, because you have the money, and that is what the seller wants. You have taken the guess work out of the deal and reduced the risk of failing.

Regarding credit cards: they already pulled a short credit report that is where they got your name. Upon a phone call or response from you accepting their credit offer they will issue a "temporary" credit line based upon your FICO score and credit report, then increase it once they have verified further. I've transfered credit cards for the "zero" teaser rate and was instantly approved via a phone call w/o job verifications, they transfered the balances immediately. Then after a month or so I got another letter stating that the credit limit was increased because of my "excellent" payment record. I know many others who like wise have done the same with the same results.

Credit card companies are in it to make a profit, they do that only with credit worthy customers. So when you get the credit card offer there is a "pre-approved" safe amount of credit extended but not your full potential credit line until researched.

Nope.

As a Sr. Mortgage underwriter here's how it goes

Pre-Approved means you fit the loan criteria with conditions to be satisfied. For a mortgage that means the underwriter still needs to validate all information that has been provided, verify funds and employment, and most important verify the value of the property.
After all that...then comes the approval.

A little different stuff to verify for credit cards....but same concept. A letter in the mail means they may have received your information from other creditors. You still have to go through the approval process.

When you are preapprove it is for a certain amount, say 200k, this gives you buying power when making a bid for property.

You are approved to that amount, you do not have the loan yet!

No, it's just a way to get your hopes up before the shoe drops and your hopes and dreams are smashed into a billion tiny shards. I've been there... I know what I'm talking about. "Preapproved" doesn't mean jacksh!t.

NO that is not the case, they say that to get you to call and try to get it. Then sometimes they want money from you. It is just a scam to make you think that you are preapproved and they can deny it just as fast.

Not really.It means that a particular bank is willing to take a chance on you,but they don't have the final word on it,the underwritters do.Its like when you get all those pre-approved credit card offers,and then when you apply,they say "oh we're sorry we can't approve your applicatin at this time because of blah,blah,blah.

No. In this day and age, it's just a marketing scheme to get you to apply for a loan or credit card. My credit was terrible after a divorce, yet I constantly got "You're pre-approved" letters in the mail. Of course, when I applied, then I received a not saying my credit sucked...well, duh...I could have told them that. haha

Enter Your Message or Comment

User Name:
User Email:
Post a comment:

Archive: Forum -Forum -Finance - Links - 1 - 2 - RSS - All RSS Feeds
The Causes and the Results. 0.034
Copyright (c) 2011 Financial Crisis Monday, May 28, 2012 - Terms of use - Privacy Policy