With that many players in the game, you can see the importance of working with a solid, well-versed loan officer.
ORIGINATION: PRE-QUALIFICATION OR PRE-APPROVAL
The first step in the lending origination process is a pre- qualification letter sent to the buyer from a lending organization. The next step is a pre-approval letter. You might be confused. There is an important difference between a pre-qualification letter and a pre-approval letter. A pre- qualification letter is when the lender simply checks your credit and asks some basic questions such as:
• “How much do you earn?” • “Where do you work?” • “Have you filed your tax returns?”
Assuming that the buyer answers the questions with satisfactory information, a pre-qualification letter is written. At this stage of the process, there is no verification of your information. You can say you make millions of dollars per year and, assuming you have good credit, be “pre-qualified” for a multi-million dollar house. With the drafting of a pre-approval letter, the lender actually goes through and verifies the prospective buyer’s income, down payment, down payment source, and ensures tax returns have been filed if the prospective buyer is a self-employed borrower. With a pre-approval letter, the lender is asserting that it has verified more information besides just your credit. They verify you have a good income, a solid job, or, if self-employed, have been self-employed for a long enough period to qualify for some
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