CFPB: What’s the difference between being pre-qualified and pre-approved for a loan?

amy-tierce-urges-caution-cfpb-daily-business-news-mhpronews-com-Amy Tierce, writing in the NationalMortgageNews, tells MHProNews that the CFPB’s website gives an answer to the question,

What’s the Difference between being pre-qualified and pre-approved for a mortgage?

but that the CFPB’s answer is not, Tierce says, “the full story.”

Some lenders have decided, she says, to “not issue pre-approval letters due to the cumbersome regulatory environment, so they may call their letter a pre-qualification. Lenders licensed as mortgage brokers can’t issue a pre-approval letter because they aren’t licensed to approve loans.” asserts Tierce, who elaborates as follows.

Here is what they say a seller should look for in a letter for a prospective borrower:

The purchase price

The loan amount

An expiration date

Names and addresses of all buyers

Percent of the down payment

Loan type (Conventional, USDA, FHA, VA, etc.)

Loan term (fixed, adjustable, step rate, 30 years, 20 years, 15 years, etc.)

Whether or not the transaction is dependent upon the sale of another property

Status of the property being sold (on market, under agreement)

Contact information for the loan officer and his or her NMLS (Nationwide Mortgage Licensing System) number

Lender name and licensing details

If the letter doesn’t state what documentation has been reviewed as a part of the process, then you should ask if the loan officer has reviewed the following:

Two years of federal tax returns

Two years of W-2’s

One month of pay stubs

Two months of asset statements checking, savings, investments to verify the source of down payment.

Credit report

Any additional documentation needs that arise out of the client interview

Her commentary closes with the advice that a seller shouldn’t take a letter from a lender they are not familiar with, regardless of what the letter is called, at face value. Researching with the lender the types of issues noted above can avoid embarrassing or costly delays. ##

(Image credits: Amy Tierce, InTouchToday, CFPB logo and MHProNews graphic additions)

 

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