What is a Preliminary Mortgage Approval is a question we see a lot…here are some answers
This is often referred to as Pre-Qualification also…
This title could be what is a preliminary mortgage approval or what a pre-qualification mortgage does not include. However, let me address some reasons why a preliminary approval or pre-qualification approval does not mean that the entire loan is approved. *This post has been updated on 03-02-2023
What Does A Preliminary Mortgage Approval Mean?
It means the credit history is acceptable, sometimes that will include income calculations (if paystub or W-2 Income statements have been provided). However, there is much more to a pre-approval than a pre-qualification/preliminary loan approval.
Borrower Concerns And What To Know Upfront
Having read some borrowers’ concerns about having approval and then all of a sudden, the loan being delayed, or declined.
It is never good news to have a preliminary approval and then hear that the loan cannot close. However, when and if you only have credit approval, it does not mean that everything else about the loan has been approved.
The employment, income, assets, and property must be approved as well. The property is the collateral for the loan and is not considered in the pre-qualification or pre-approval process.
Each aspect has guidelines that must be followed, there are no exceptions. It all depends upon the financial status of the applicant(s), mortgage product type, and mortgage property being offered for collateral.
What Normally Occurs With a Preliminary Approval or sometimes called pre-qualification
- Many times, most mortgage lenders will take your application over the phone and pull credit with your permission. This means that ONLY the credit is acceptable. They may ask you what your monthly income is, which is called at this point “stated,” but not verified.
- They may or may not verify your employment/income history initially. If they do not review all of the credit files, you do not have a pre-approved application.
- In some circumstances, if this is an in-office visit and you have taken some documentation with you, they may review a paystub, and W-2, and run the preliminary application through Desk Top Underwriter (DU, FNMA) or Loan Prospector (LP, FHLMC). This is to get the initial credit approval.
- Other times they may input the information you have given them verbally, and run the credit approval. Therefore nothing is pre-approved until it is all verified and meets the minimum requirements for the loan amount requested.
What Is A Preliminary Mortgage Approval Mean
This preliminary mortgage approval means that your credit is okay to go forward. To get to the end results, they will have to certain required documentation. The documentation request will be what applies to the product type you are requesting, etc. It can also depend upon any criteria that may be listed on the credit report or paystubs and employment documentation.
There are things that can pop up that can change the game plan in its entirety. It is not a commitment to a loan.
When You Receive A Credit Approval
When the lender delivers the preliminary or pre-qualification to you, they will also request additional documentation to get to a pre-approval loan commitment.
*Please note that the information we give you here is more inclusive. However, most lenders will use Desk Top Underwriter for FNMA or Loan Prospector for Freddie Mac. This means the documentation could be less, or more depending upon the information provided in your application submission, credit report, and evaluation.
It may also include something from the credit report that needs to be cleared up or something they have observed from any upfront paystub/W-2/tax returns, etc. Many times the only approval you have at this time is the credit, nothing more, to say this again clearly.
What Is a Pre-Approved Mortgage Loan?
