Today, we want to address a common question that we come across every day.
We’ll talk to clients and they’ll tell us, “I have a full pre-approval. I’m just calling to shop rates.”
When we hear this we ask, “Did you submit all your documents to your lender? Have you taken an application? Have they submitted your documents through the entire process? Do you need finance contingencies?”
And a lot of times, the answer is no.
That means the clients probably just have a pre-qualification. In some cases, the lender is just taking information down over the phone, and they may collect some of the documents from you, but they’re not really running it through their entire system and submitting the client’s loan to an underwriter to be looked at. Technically, this is not a pre-approval.
Only an underwriter can give you a pre-approval, not an automated system.
To get a full pre-approval, you’ll have to fill out a loan application, which can be done online. Then you’ll have to submit all of your documentation to your mortgage advisor, after which your documents will be submitted to the bank, so the underwriter can verify all of the data.
At Gold Star, we take that one step further.
We have a program called Fast Pass, which means not only do we collect all the initial documents upfront, but my team will start pre-underwriting it on day one, looking at all the potential conditions that an investor or an underwriter would require. So we bundle all the documents together, send them to the underwriter, and within 48 to 72 hours, we get our Fast Pass approval.
This means that when an agent is submitting the offer, they can state for the client that they don’t need any financial contingencies, which is huge in a seller’s market.
So ultimately, the difference between a pre-qualification and a pre-approval is that with a pre-qualification, someone has taken your information and may or may not have verified it or run it through an automated system and concluded that, yes, assuming your numbers check out, you are approved to purchase the home.
With a pre-approval, an underwriter reviews your documentation, signs off on it, and gives a stamp of approval, and your lender allows you to submit your offer with no finance contingencies.
So if your lender is telling you that you’re pre-approved, you’ll want to ask them, “If I’m fully pre-approved, and the underwriter has seen all of my documents, can we check off the box with no finance contingencies?” In a seller’s market, that’s going to help your offer stand out, and allow you to compete against cash buyers.
If your lender is saying no, then ask why. It could be that they didn’t really submit it to the underwriter for formal approval.
If you’re serious about buying, ask questions and make sure that you’re getting formally pre-approved.
If you’re looking to buy, sell, or get financing, please contact us. Have a great day!