Temecula Home Buying | Mortgage Approval Defined

Yesterday afternoon, I was with some Temecula, first time home buyers, who were confused about being pre-qualified. I was explaining to them that they must be careful not to add any additional debt to their credit report.

During the loan process:

• Never make any large purchases
• Keep your credit cards balances at 1/2 of the credit limit, (or less)
• Don't change your employment

Wait until after escrow is closed and you own the home before making any changes to your credit or employment.

My clients thought that because they had a pre-approval letter they were already approved for a loan. They did not understand why purchasing a car or any other item may decrease their ability to be approved for their loan.

Here are the definitions of the three most commonly used loan approval terms and what they each mean. They are all very different.

What are the differences between Loan Pre-qualification (a pre-qual letter), Loan Pre-approval and Final Loan Approval?

Loan Pre-qualification -(Pre-qual letter), When you submit an offer to purchase a home a pre-qualification letter is needed along with the offer to support your credit worthiness. This process consists of the lender looking at a copy of your credit report and using the information you supply them about your income and debt to determine how much loan you can afford. Your credit accounts and employment information is not verified.

Pre-approval- Happens when you have a signed purchase agreement for a home, that you have submitted an offer on. This is when all credit and employment information is verified. Verifications of Employment, (VOE) and Verifications of Bank Deposits, (VOD) for your down payment funds are sent directly to your bank and your employer to be filled out by them. (Deposits are often from a family member and a gift letter is initiated at this time if that is the case).

The home is appraised at this time and must appraise for the sale amount you are have agreed to pay. If the appraisal comes in lower than the contractual amount then the contract is re-negotiated.

Final loan approval - Occurs when the property has been appraised, all required documentation is in the hands of the lender and all contingencies have been met. An loan underwriter takes a look at your loan qualification and may ask for additional information and may also do a final credit report to check your credit and make sure that your income to debt ratios are still acceptable.

• Do not make any large purchases or obtain any additional lines of credit or change your employment. This may slow down or make it so that you are no longer qualified for your loan altogether.

For more information on getting pre-qualified for a loan in Riverside County contact me about our Free First Time Home Buyer Seminars.

Search for homes in Temecula, Murrieta, Wildomar, Menifee and more on my website at www.soreal.biz