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Old 03-12-2013, 01:00 PM   #1
Handbag Lady
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First time homebuyer questions

I have a CPA. I have a realtor. I have a bank. But, as much as I trust those people, I'd LOVE to hear from real people who have been in my shoes because that is how I roll.

We are in the stages of getting loan approvals and I am not getting an answer from my bank on the following.

What is the difference, in your experience of buying a home, between a Pre-Qualification and a Pre-Approval?

I thought we needed a Pre-Approval, but I am finding out my bank only does Pre-Qualifications. Should I shop around for another bank?
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Old 03-12-2013, 01:19 PM   #2
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I'm no expert but I think you should shop around for another bank anyway so you can compare rates. We just bought our first house a few months ago. It was a hair-raising process!
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Old 03-12-2013, 01:28 PM   #3
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A pre-qualification (I think) is when you go to the bank, tell them how much money you make and what other obligations you have, and they type out a letter saying that you are pre-qualified to borrow $xxx,xxx. Yep, it really means nothing.

Pre-approval, I believe, is that the bank starts the approval process. I don't know of many banks that do that without a contract on a house, though.

Honestly, I haven't been asked for either in a long time.
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Old 03-12-2013, 01:43 PM   #4
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Quote:
Originally Posted by Handbag Lady View Post
I have a CPA. I have a realtor. I have a bank. But, as much as I trust those people, I'd LOVE to hear from real people who have been in my shoes because that is how I roll.

We are in the stages of getting loan approvals and I am not getting an answer from my bank on the following.

What is the difference, in your experience of buying a home, between a Pre-Qualification and a Pre-Approval?

I thought we needed a Pre-Approval, but I am finding out my bank only does Pre-Qualifications. Should I shop around for another bank?
"Prequalification is an unofficial estimate of how much house you can afford. A loan officer will make an educated guess about your ability to buy a home based on your verbal or written submissions of income, finances, and credit history. Lenders will not generally pull your credit report during this evaluation. They will calculate your debt-to-income ratio and write you a letter of prequalification stating how much you should be able to borrow. This process is usually free, but it does not give you any real credibility with lenders or sellers. The prequalification is based on vague figures and does not take into account all your financial factors. Also, many mortgage websites today offer on-line prequalification assessments so that you’re not even required to speak to a live person to get pre-qualified. The main benefit of prequalification is getting a general idea of how much you can afford.

Pre-approval on the other hand really carries a lot of weight in the mortgage and real estate industry. In order to be pre-approved for a loan you must sit down with your preferred lender and provide them with documents such as tax returns, bank statements, and business licenses among others. Lenders will analyze these and other information gained by calling your employer and pulling your credit report. (The fee for pulling your credit scores may be the only cost you pay in the pre-approval process.) They will then produce a pre-approval letter that certifies that you have the resources to afford to buy a home for a certain amount. The pre-approval letter will also usually specify the interest rate you’ll pay for borrowing such a sum. Sellers love buyers who are pre-approved because they have proof that the buyers have financial backing and are prepared to pay the required amount. In real estate hot spots, some sellers won’t even consider offers from buyers without pre-approval letters. "

If you're just casually looking, don't get a pre-approval letter. You want to wait to have credit pulled until you're really ready. Keep in mind your bank might CALL it a pre-qual and it's actually a pre-ap with a credit pull.

I agree with pp, DO check out at least 1 broker and 1 credit union if you can. Compare apples to apples (ask about all fees, other charges, appraisal fees, application fees, broker fees, etc.).

Also, a good broker/lender will be willing to give you pre-approval letters tailored to each offer you make. So if you are pre-approved for up to $150,000 loan, but you're making an offer on a house where it's listed for $150,000 and you're offering $140,000 and putting 20% down. In that case, you only actually need to be approved for $112,000. And THAT is what you want the pre-ap letter you give them to say.

Once you have an accepted offer and you're moving forward, keep records of everything! Be very vigilant. If they ask for something, send it in such a way that you have a receipt or get a 'Yes, we got ABC specific item' from you. So they can't turn around the day before closing and say 'We didn't get'. If you are on the phone, follow up with a paper trail or email and a CONFIRMATION that they received such. It will save you headaches.

And whatever you do, while in the process do NOT pull your credit, apply for a credit card, buy a new car, or do ANYTHING credit related.

Good luck!
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Old 03-12-2013, 03:07 PM   #5
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I bought my first house last year. I already had a contract and went through a pre-approval process before the official papers were drawn up. I asked as a curosity how much I was approved for, they said they didn't calculate that, just that I was approved for the amount I asked.
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Old 03-12-2013, 03:33 PM   #6
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By any chance is this SunTrust? SunTrust only does pre-qualify, but they pull your credit score, etc, just like a pre-approval. They do not do a pre-approval process. During the pre-qualify we told them how much we were looking and they ran their numbers off of that; not a total amount approved for (max).

I think a few banks are moving more this direction.
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Old 03-12-2013, 03:47 PM   #7
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Thank you all for the help! Bren's Mom, that is the info I needed to hear from someone.

The bank we're thinking of using is my credit union, a very strong and known one, somewhat related to a Famous Mouse.

I would prefer to get a pre-approval, clearly.

We were lectured by our realtor to not buy ANYTHING and we won't. I also paid off my car last month! YAY me! We don't even have a GASP! vacation planned at this time.
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Old 03-12-2013, 03:51 PM   #8
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Quote:
Originally Posted by jlewisinsyr View Post
By any chance is this SunTrust? SunTrust only does pre-qualify, but they pull your credit score, etc, just like a pre-approval. They do not do a pre-approval process. During the pre-qualify we told them how much we were looking and they ran their numbers off of that; not a total amount approved for (max).

I think a few banks are moving more this direction.
I've asked my Bank (well, credit union) if this is what they do. THANK YOU for the insights.
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Old 03-12-2013, 03:53 PM   #9
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Quote:
Originally Posted by Bren's Mom View Post
"Prequalification is an unofficial estimate of how much house you can afford. A loan officer will make an educated guess about your ability to buy a home based on your verbal or written submissions of income, finances, and credit history. Lenders will not generally pull your credit report during this evaluation. They will calculate your debt-to-income ratio and write you a letter of prequalification stating how much you should be able to borrow. This process is usually free, but it does not give you any real credibility with lenders or sellers. The prequalification is based on vague figures and does not take into account all your financial factors. Also, many mortgage websites today offer on-line prequalification assessments so that you’re not even required to speak to a live person to get pre-qualified. The main benefit of prequalification is getting a general idea of how much you can afford.

Pre-approval on the other hand really carries a lot of weight in the mortgage and real estate industry. In order to be pre-approved for a loan you must sit down with your preferred lender and provide them with documents such as tax returns, bank statements, and business licenses among others. Lenders will analyze these and other information gained by calling your employer and pulling your credit report. (The fee for pulling your credit scores may be the only cost you pay in the pre-approval process.) They will then produce a pre-approval letter that certifies that you have the resources to afford to buy a home for a certain amount. The pre-approval letter will also usually specify the interest rate you’ll pay for borrowing such a sum. Sellers love buyers who are pre-approved because they have proof that the buyers have financial backing and are prepared to pay the required amount. In real estate hot spots, some sellers won’t even consider offers from buyers without pre-approval letters. "

If you're just casually looking, don't get a pre-approval letter. You want to wait to have credit pulled until you're really ready. Keep in mind your bank might CALL it a pre-qual and it's actually a pre-ap with a credit pull.

I agree with pp, DO check out at least 1 broker and 1 credit union if you can. Compare apples to apples (ask about all fees, other charges, appraisal fees, application fees, broker fees, etc.).

Also, a good broker/lender will be willing to give you pre-approval letters tailored to each offer you make. So if you are pre-approved for up to $150,000 loan, but you're making an offer on a house where it's listed for $150,000 and you're offering $140,000 and putting 20% down. In that case, you only actually need to be approved for $112,000. And THAT is what you want the pre-ap letter you give them to say.

Once you have an accepted offer and you're moving forward, keep records of everything! Be very vigilant. If they ask for something, send it in such a way that you have a receipt or get a 'Yes, we got ABC specific item' from you. So they can't turn around the day before closing and say 'We didn't get'. If you are on the phone, follow up with a paper trail or email and a CONFIRMATION that they received such. It will save you headaches.And whatever you do, while in the process do NOT pull your credit, apply for a credit card, buy a new car, or do ANYTHING credit related.

Good luck!


Again, this is great info, thank you. This is brilliant advice.
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Old 03-12-2013, 04:10 PM   #10
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Quote:
Originally Posted by Handbag Lady
We were lectured by our realtor to not buy ANYTHING and we won't. I also paid off my car last month! YAY me! We don't even have a GASP! vacation planned at this time.
This is a good policy, large purchases should be curtailed just to avoid any question to your purchase ability.
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Old 03-12-2013, 05:32 PM   #11
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Quote:
Originally Posted by Handbag Lady View Post
I have a CPA. I have a realtor. I have a bank. But, as much as I trust those people, I'd LOVE to hear from real people who have been in my shoes because that is how I roll.

We are in the stages of getting loan approvals and I am not getting an answer from my bank on the following.

What is the difference, in your experience of buying a home, between a Pre-Qualification and a Pre-Approval?

I thought we needed a Pre-Approval, but I am finding out my bank only does Pre-Qualifications. Should I shop around for another bank?
Personally - I would suggest getting an attorney to review the contracts you are signing. I have purchased 2 houses, and each transaction went much smoother due to the attorneys.

Now - what do you need a CPA for?
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Old 03-12-2013, 07:46 PM   #12
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In addition to getting confirmations for any items you send, keep a copy of EVERYTHING you give the bank in a file or pocket folder and keep that available at all times! Even if you have a confirmation that they received it, if they call because they can't find it when they want it, it will delay the process - much easier to just send it over again.
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Old 03-12-2013, 08:45 PM   #13
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My realtor had me get pre-qualified with a mortgage broker so there wasn't a home we looked at that we couldn't afford.

When we made a purchase offer, the broker then shopped our loan with multiple bankers to get the best rate and terms. He got us such a good deal, that when I went to refinance with that same bank directly without a broker 5 years later, their loan officer didn't believe the terms we had because , according to him "we never write loans with less than 20% down payment". I put 5% down. It wasn't until he pulled the original paperwork from the archives that he found out his bank HAD written a mortage with only 5% down.
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Old 03-12-2013, 08:59 PM   #14
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We are smack dab in the middle of the process right now.

1. We found an agent who referred us to a mortgage person. Agent then said call us when you are prequalified. The agent we are using was very confident that his mortgage connection does not send him pre-qualifys that will not very likely get approval

2. Pre-Qual process took a month. We supplied tax returns, bank statements, check stubs etc as well as rent receipts and permission to pull credit reports

3. Pre-qual was granted, we started working with an agent

4. We are in a hot housing market, it took 3 offers before we landed a house and this has taken a little over a month.

5. Offer was formerly accepted, we paid 10% in earnest money, arranged the inspections and the packet went to the title company.

6. Loan processor locked our interest rate and then sent our loan to the approval dept. We supplied current bank statements and check stubs to keep things up to date.

7. Our loan is processing, our packet is in escrow at the title company and we are awaiting the appraisal. We are scheduled to close the first week of April.

Start to move in, almost exactly 3 months.

The best advice I have is have your paperwork in order; bank statements, check stubs and be prepared to explain anomolies on credit reports or in employment or in income. When asked for a document, provide it asap and keep a copy of when it was sent. I scan everything and send via email. Then I keep it all in a house folder in case I need to send it again or access for any reason.

Be prepared to document where your down payment is coming from and be realistic and ask questions about closing costs and fee's.

Good luck, its nerve racking but since we sold our home last summer to relocate I have been itching to buy again. I'm not a good renter
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Old 03-12-2013, 09:33 PM   #15
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One more tip...whatever you do, do NOT make any large deposits into your bank accounts once your mortgage bank starts work on your application.

They want to be sure that you're able to pay for the home on your own, without borrowing money from others. So that want proof that a) you have the entire amount due at settlement in a liquid account, like a checking account, and b) that's all coming from your own funds and investments. Apparently some people borrow a big chunk of money from friends or family to 'pad' their bank account so it looks like their financial condition is better than it is.

I had to liquidate some stocks and bonds for the downpayment and other money due at closing, and I had to tell the bank exactly what I would be selling, and from what brokerage accounts. Then I had to provide transaction statements from my brokerage showing the sales, and statements from my bank showing the deposited amounts, and they had to match to the penny.

I made the mistake of depositing a bunch of rebate and dividend checks with the check from the brokerages, so the amount leaving the brokerage didn't match the amount going into my checking account. OMG, what a disaster. I spent an entire afternoon on the phone with the bank, sending them check images to show what other checks I had deposited, where they came from, and the total amount matched the statement discrepancy.
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