Orange County Mortgage PreApproval - FHA and Conventional Loans

What is the difference between getting a PreQualification versus PreApproval? Why do I need either? I hear these questions quite a bit. There are very good reasons why a potential home buyer would want to get PreApproved, and there are important differences between a PreQualification and a PreApproval.

PreQualification

A PreQualification is based on verbal information received from a borrower, many times just over the phone. Answers to questions such as:

• What do you do for work?
• How long have you worked for your current employer?
• Are you paid hourly or on salary? Full time, 40 hours per week? Overtime or bonuses?
• How much do you currently pay for rent?
• How much of a mortgage payment are you comfortable with?
• How is your credit? Any idea of your current FICO score?
• Do you have any car payments, student loans, credit card debt, judgements, collections?
• What about alimony or child support?
• How much money do you have in the bank? 401K? Potential gift and source?

With this information a good loan officer will be able to prepare a detailed loan scenariofor the borrower that will give them a good idea of what they can qualify for, provided the information proves to be as discussed. For many borrowers, the information given even over the phone will prove to be fairly accurate, provided the questioning has been thorough. But problems can arise, especially in the case of a self employed borrower with a Schedule C on the tax returns. Also, a borrower in a sales profession who is able to write off business expenses (2106 Expenses - unreimbursed employee expenses) may end up having less income after expenses than discussed over the phone. For this reason, along with a few others, nothing beats going through with PreApproval BEFORE making an offer on a home.

A PreApproval involves the following:

• Verification of all income, assets, and job history.
• Collection of 2 years W2's and in many cases 1040's.
• Pay stubs for the most recent 30 day time period.
• Copies of 2 months bank statements, all pages, including 401K and investment accounts.
• A complete loan application.
• Credit report is run.
• Automated loan approval is run and received same day.
• Additional verifications are ordered if required, depending on circumstances of file.

Getting a borrower PreApproved is actually not as difficult as it may sound. I can typically complete a loan application over the phone in 10 minutes or less, run credit and have automated approval within minutes. From there is it just a matter of letting the borrower know what is needed for verification purposes.

Once a borrower is PreApproved they are able to confidently go out and look for a home that not only fits their needs, but will fit their budget. Also, the seller will be more willing to accept an offer from a buyer who has already been PreApproved, especially if the PreApproval is from a Direct Lender.

For more information on Mortgage PreApproval, contact Tim Storm with Frost Mortgage. Frost Mortgage is an FHA Direct Endorsed lender located in Irvine, CA.