Some lenders will prey on the fact that you (and borrowers!) don’t know the difference between these two types of letters. A professional lender will not assume that a pre-qualification letter is good enough to begin the loan process. I work with my customers to achieve pre-approval status before discussing anything further. As you might know, after the housing crash we had some years ago starting in 2008, banks are now more stringent about loans. As such, a pre-qualification letter is simply not good enough to get a mortgage from a professional organization in today’s marketplace. Any lender who tells you otherwise is not a lender you want to work with.
You need a rock-solid preapproval letter.
PROCESSING: A SOLID LOAN ESTIMATE
The loan estimate lists loan terms and settlement charges to be paid if the borrower decides to go forward with working with any particular lender. It is not a pre-approval nor is it a pre- qualification. It is more of a “This is what we will likely offer you when you start the loan process and are approved for the loan.” The loan estimate is basically an upfront quote of all the different costs, fees, interest rates, etc., that the buyer can expect to pay if they proceed with a loan from that lender. It explains which charges can change before settlement and which charges must remain the same. In the loan estimate phase, the various fees that are associated with getting a loan to buy a property are compiled. It is going to have estimated appraisal fees, inspection fees, and estimated closing fees.
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