Union County Real Estate Talk

Charlotte NC Home Buyers—Did Your Lender Pre-Qualify You, Pre-Approve You or What???

Are you a potential Charlotte NC home buyer?  Have you spoken with a mortgage loan officer?  Did your loan officer give you a document that says that you are qualified to purchase a home?  Are you mystified about what that document means?

I have learned to be wary of the pre-qualification and pre-approval letters that mortgage lenders issue to home buyers.  Here is why.  As a Charlotte NC home buyer, you may think that you have a document that entitles you to purchase a home without further scrutiny or loan hurdles.  In reality, what you may have is only an opinion from a loan officer that will not stand up to today’s documentation and review process.

Learn the four types of approval letters that lenders issue to make your home-buying process smoother and easier.  This is what you need to know.

• Pre-Qualification Letter.  This is the first step.  You speak with a loan officer on the telephone, the loan officer pulls your credit and asks you about income type and amount and financial assets.  None of your financial information has been verified and the loan officer can only issue an opinion that you should be able to qualify if your information checks out.  In my opinion, it is too early to make an offer on a home if you are at this stage.
• Pre-Approval Letter. To get this letter, you must take the next step and fill out a formal loan application form.  Your loan officer should ask you to supply documentation on income and assets that supports what you put on the loan application.  Your application is then submitted to an Automated Underwriting System or Desktop Underwriting System.  If this computer program gives you an accept, you can get a pre-approval letter.  Keep in mind that this approval is conditioned on an underwriter’s verification of the data entry into the program, any outstanding documentation, a property appraisal and title work for the property.  If the underwriter is unable to verify what is on your loan application, then the pre-approval letter is invalid.  I believe that most home buyers can make an offer on a home at this stage unless their financial situation is so complex that they should go to the next step.
• Approval Letter.  After the loan officer takes the application and gathers all the required documentation, an underwriter reviews the package for compliance with the Automated Underwriting Acceptance, mortgage product and lender guidelines.  If your loan package clears all of these hurdles, you can get a true approval with conditions letter.  Conditions could include additional documentation, an acceptable home appraisal, and clear property title.  Some lenders won’t issue an approval letter without the appraisal and title work.  Once you get the approval letter, the process is nearly complete, but you still must clear appraisal and title work hurdles.
• Commitment Letter.  Once the appraisal, title work and homeowner’s insurance policy are received, reviewed, and approved by the underwriter, you will get a commitment letter.  This letter states that you are approved with no conditions outstanding preventing the loan from closing, except perhaps a statement showing the prior sale of your current residence.  Your file is now Clear to Close.  Congratulations!  A clear to close means that you’ve made it to the end of the process.

Want to know more about buying a Charlotte NC home?

First Time Home Buyers Guide

Home Buyer Tax Credit

Copyright 2010.  Carol Fox.  Allen Tate Realtors.  *Charlotte NC Home Buyers—Did Your Lender Pre-Qualify You, Pre-Approve You or What???*