There Is A Major Difference Between A Mortgage Pre-qualification And A Mortgage Pre-approval. Do You Know What It Is?
Traditionally, home buyers, home sellers, real estate licensees, mortgage licensees, attorneys, financial advisors, and other miscellaneous servicing company personnel who assist in the performance of the entire home buying, home selling, and lending processes have been and still are confused between the terms Mortgage Pre-qualification versus Mortgage Pre-approval. It is absolutely critical for all of these categories of people to thoroughly understand: 1) the difference between real estate buyers getting pre-qualified for a mortgage versus getting pre-approved for one, and 2) the benefits of getting real estate buyers pre-approved. Accomplishing these things can prevent a lot of anger, anxiety, emotionalism, frustration, arbitrations, mediations, threats of lawsuits, and actual lawsuits from occurring.
Definition Of A Mortgage Pre-qualification
When a home buyer gets Pre-qualified by a mortgage loan officer, prior to purchasing a home, it means that the buyer has only verbally represented information to the mortgage loan officer pertaining to their income, expenses, and available cash and liquid assets. Based upon these verbal representations a mortgage loan officer calculates a mortgage amount or amounts that home buyers will potentially be qualified for. No mortgage processing, of any kind, is done to verify in writing any of the home buyer’s verbal representations. Simply stated a Pre-qualification is not a Pre-approval because it is not a Mortgage Commitment.
Definition Of A Mortgage Pre-approval
When a home buyer gets Pre-approved by a mortgage loan officer, prior to purchasing a home, it means that the buyer has actually filled out a mortgage application and had it processed to confirm the information on it and their verbal representations, made to a mortgage loan officer during a Pre-qualification session. As a result of completing mortgage processing the home buyer’s information, pertaining to their income, expenses, and available cash and liquid assets, are verified in writing. Based upon these written verifications a Mortgage Commitment showing an approved mortgage amount or amounts along with any other miscellaneous terms and conditions can be issued to the home buyers in writing. Simply stated a Pre-approval is a Mortgage Commitment even though it contains lender conditions that must be fulfilled.
8 Benefits Of A Mortgage Pre-approval
There are many Benefits to getting home buyers a Mortgage Pre-approval versus a Mortgage Pre-qualification prior to purchasing real estate. The major 8 Benefits are as follows:
Home sellers prefer selling their properties to pre-approved home buyers
Real estate listing agents prefer having their listings sold to pre-approved home buyers
Real estate selling agents prefer working with pre-approved home buyers
Home buyers, who are pre-approved, are in a stronger position to negotiate with home sellers because they are perceived as “cash buyers”
Mortgage processing must be done anyway so why not do it prior to purchasing a home instead of the traditional way of after purchasing one
Getting home buyers pre-approved can potentially eliminate embarrassing situations from occurring for home buyers
Getting home buyers pre-approved dramatically increases the odds of a real estate transaction staying together
Getting home buyers pre-approved dramatically decreases the odds of home buyers and home sellers suing real estate licensees, mortgage licensees, attorneys, and other miscellaneous servicing company personnel who are involved in the entire home buying, home selling, and lending processes for malpractice.
There’s no question about it, when real estate listing agents consistently take overpriced listings and market them with good classified ads, display ads, television ads, radio ads, multiple listing service exposure, open houses, broker luncheons, and even Good Year Blimp exposure it still results, in virtually all cases, with a property not selling. And, as I have already said, when this happens it can and does lead to a lot of anxiety, emotionalism, frustration, arbitrations, mediations, threats of lawsuits, and actual lawsuits as well as requests to cancel Listing Agreements and Transaction Broker Agreements, canceled Listing Agreements and Transaction Broker Agreements, Listing Agreements and Transaction Broker Agreements that are not extended. It also can and does lead to the Ultimate 4 Step Dagger Death which can literally kill a real estate listing agent psychologically and financially.
The above article is an excerpt from my Revolutionary Philosophies For U.S. Real Estate Market Recovery book. This book is the second of 5 that comprise my U.S. Economic Recovery Training System.
Respectfully, Phil Mitsch