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.

If you found this article informative, please subscribe to Homeowner’s Blueprint weekly updates, and you will receive notification when new articles are posted to the website.

Speak Your Mind

*