Buying a home can be a very exciting time, but it can also bring a lot of stress. If you have never bought a home before, you have to figure out all the lingo and paperwork that comes with banks and realtors.
The Ashton Real Estate Group of RE/MAX Elite has a preferred mortgage company called Ameris Bank and in Nashville we have the resources of Armando SanMiguel, Snr VP, who has a wealth of knowledge which allows our agents to become educated in the terms and ways of the mortgage business and also allow Armando to become a conduit for information for our clients.
Preapproved and prequalified are two words that can be very confusing for home buyers. A majority of home buyers consider preapproval and prequalified to be the same. Even worse, some agents use these terms simultaneously, which can confuse home buyers further.
When a home buyer is prequalified, this means that they are approved by the creditor to obtain a loan. For this to occur, typically, the creditor will talk to the home buyer, and decide that they are eligible for a loan.
At this step, the creditor has yet to confirm the home buyers credit report. It is only going off what the home buyer has told them. This is not the case with all creditors, but most only ask a series of questions to deem a home buyer prequalified. At this stage, the creditor may have not even met or reviewed a loan application with the home buyer.
When a home buyer has been presented a preapproval letter by a creditor, it is confirmed that the creditor has checked their credit report and submitted a loan application. The creditor could go as far as sending the buyers information through a computer-generated approval process. This is known as desktop underwriting or a DU.
Only an underwriter is authorized to grant a loan. Until this is done, preapproval is not truly complete. The underwriter completes this step during the last part of a loan. When the buyer receives their preapproval letter, it will typically state that this decision is pending until appraisal, title reports, subject property conditions and final underwriting are complete.
Understanding the difference between prequalification and preapproval is one of the most important steps towards owning your home. Make sure you know whether you are prequalified or preapproved before you start home shopping.
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