Pre-Qual, Pre-Approval & Conditional Approval Differences

When it comes to mortgages, they don’t fit everyone the same way.

Before you start your home search and start the process to qualify for a mortgage loan, it’s important to understand the differences between a mortgage pre-qual, pre-approval and a conditional loan approval. It’s easy to confuse these terms, and even industry experts incorrectly use them interchangeably from time-to-time. Each one of these has a different level of approval, and can cause your timeline to vary greatly with regard to how quickly your offer is accepted. Here’s an overview of the differences.

Pre-Qual (or Pre-Qualification): If a loan officer/mortgage lender wants information about your income or credit, this is a pre-qualification. It’s a quick way for them to determine your ability to qualify for a loan. They will normally run your credit report, and also might look at your pay stubs, bank statements, W2’s, and tax returns. If you have the ability to get a pre-qual letter from your lender, that you can submit with your purchase offer.

Pre-Approval: If you are able to obtain a pre-approval letter from your lender, it can greatly expedite your home buying process. A pre-approval contains more information about a borrower, so they will have to run your credit, you will need to complete a loan application, your income and funds to close documentation will have been submitted and reviewed, and your application underwritten by a loan officer.

Conditional Approval/Loan Commitment Letter: This is the highest level of approval you can have on your side before submitting to a fully executed purchase contract, title report, appraisal, or satisfaction of additional conditions. A conditional approval comes down from the underwriter, and is actually a loan commitment. If you are competing with multiple buyers for a home, sellers will often give preference to a buyer with a conditional approval because of the added assurance that the loan will close.  This type of loan generally closes much quicker too, taking only 15-20 days if all parties work together.

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