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I have a ton of Realtors tell me how frustrated they are because their clients lost a home due to an inadequate loan pre-qualification from a mortgage loan officer.
It always amazes me that a Mortgage Loan Officer would pull a person’s credit, review credit scores, enter non verified income (via VOE) into their system and “pre-qualify” their buyer for a mortgage loan.
More often than not loans that are “pre-qualified” don’t close due to something that was missed by the Loan Officer and caught by the underwriter at a later date. Catching things too late will end up costing the buyer money out of pocket for inspections and an appraisal.
Here is my opinion on the differences I see in a mortgage pre-qualification vs a mortgage pre-approval from the years of experience that I’ve had in the mortgage business.
Pre-qualification
A limited mortgage pre-qualification seems to be the most commonly used practice (and poorest choice) for reviewing a client’s information to see if they qualify for a home purchase or refinance.
What I have seen other Loan officers do in the past is run a person’s credit to see what their credit score are and then input their income from paycheck stubs into their system to see what the borrower’s debt to income ratios are. They then use that limited information to see if their clients “qualify” for a mortgage loan.
These loan officers don’t look at potential court ordered child support payments, outstanding tax lien, bankruptcy or foreclosure seasoning, or net income after tax write offs listed on previous years income tax returns. Those factors alone can affect the borrowers debt to income ratios and result in a potential future loan denial.
All to often loans that are pre-qualified don’t close because all the variables weren’t checked out before the loan is sent into underwriting.
Pre-approval
I pre-approve my ALL of my clients for a mortgage loan by using a MUCH more in depth approach. What I have found that works best is getting as much information up front as possible (see https://mortgagebynick.com/purchase/document-checklist/) to evaluate their Mortgage Loan BEFORE it goes into Underwriting. We look at things like child support orders, divorce decrees, worst case debt to income ratios, credit scores, job time, recent job changes etc. We even do a judgement and public record search when we run credit ahead of time so we can address any potential issues that we see.
I always look at the complete overall scenario in depth before a borrower is sent out with their Realtor to look at homes. Doing an in depth evaluation of a borrower’s loan up front ensures smooth sailing through underwriting without any issues down the road.
Once I have “all” of my clients information (see https://mortgagebynick.com/purchase/document-checklist/) we put together a mock loan application and run it through an “Underwriting Engine” ahead of time to see what additional items (if any) that we need to address up front.
Once we run their loan through the underwriting engine we’ll be able to tell if the borrower qualifies for a mortgage based on their credit, source of down payment, debt to income ratios, job time, full credit and underwriting analysis etc. The mortgage Pre-approval will allow us to see what price range a person can shop in and what homes they truly qualify for.
Once their clients are fully pre-approved using my in depth analysis Realtors can take them out to go shopping for homes with certainty.
Call me at 616-644-0885 to get started on your mortgage pre-approval today!
