Pre-Qualified vs. Pre-Approved
Differences Between a Loan Pre-Qualification and a Loan Pre-Approval Letter
Provided by Spruce Mortgage
A loan pre-qualification is a review of a borrower’s information for a loan application. The borrower provides stated information about their income, assets, and liabilities. This information is not verified. The pre-qualification provides the borrower with information to begin the process of a home purchase.
A loan pre-approval is a more in-depth process where a borrower’s income, assets, and liabilities information is collected and verified through a loan application, a credit report, and the automated Fannie Mae/Freddie Mac underwriting system. The automated underwriting system evaluates the risk of the borrower based on the information submitted.
The automated system assigns a level of risk to the borrower, e.g Accept Plus, Streamlined Accept, Accept, A-minus, and Caution. The level assigned is a solid indicator of how the loan will be viewed by an actual underwriter once the loan is submitted for approval. Once this process is complete, a pre-approval letter can be written by the loan officer on behalf of the borrower. The pre-approval letter is necessary when making an offer on a property.
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