“Hi Gary. We just talked with a mortgage broker and got mortgage loan approval. Buy my wife mentioned that youve said some loan approvals arent really approvals. What did you mean?”
***ANSWER:
When is a loan approval not a loan approval? Sadly, the answer is: most of the time.
I recently got an approval letter stating the person was fully approved subject to:
1. Verifying income
2. Verifying funds
3. Verifying credit
4. Proof of any credit-related resolutions (if applicable)
5. Final lender approval
I ask you would YOU really call that approval?
If you have a short conversation with a lender on the phone and they tell you youre approved, theyre almost certainly lying to you and youve only been pre-qualified. Yes, even if they write you a letter using the word approved.
There are 3 levels of loan qualification/approval:
1. Pre-qualification
Youve had a conversation with a loan agent and perhaps your credit has been run. Theyve given you their opinion of how much youre qualified to borrow
based on their skill, knowledge, experience, and honesty. Please pay close attention to the words following the
!
2. Pre-approval
Your credit has been run and youve been through some kind of underwriting process, be it human or automated desktop underwriting. Your funds, assets, and employment have probably not been verified. I believe that with some no-verification loan programs (growing very rare), you could be pre-approved without going through any underwriting.
3. Approval
The above, plus all required items have been verified, the home has been appraised, title checked, Ts crossed, Is dotted, and all is approved.
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