SURF TO TURF HOMES | 13361 ATLANTIC BLVD, 904-708-4663 | 922 3rd St, 904-221-2605 | JACKSONVILLE, FL
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What is the difference between a Pre-Approval and a Pre-Qualification Letter for a Purchase of Sale Agreement? 

Pre-Qualification:
The estimation of your borrowing power from a lender and can be accomplished with a simple phone call.
The pre-qualification is based on:
1. Income and debt levels that you provide to a lender.
2. Possibly (but not always) a credit check.
A pre-qualification is a determination on whether the prospective loan applicant would likely qualify for credit under a lender's programs and standards, or a determination on the amount of credit the prospective applicant would likely qualify. 

Pre-Approval:
A written commitment issued by a lender after a comprehensive analysis of the creditworthiness of the applicant, including verification of income, resources, and other such matters as is typically done as part of a normal credit evaluation program.
Conditioned upon the following:
1. Identification of a suitable property
2. No material change in the applicant's financial condition or credit worthiness prior to closing
3. Limitations not related to the financial condition of attaches to a traditional mortgage application, such as completion of a home inspection, acceptable title insurance, certification of clear termite inspections, etc. The issuance of a pre-approval letter implies that a credit decision has been rendered which also means that the loan has been submitted to underwriting. 


Which is better?

The pre-approval is a more complete and formalized process where the borrower actually meets with the lender and supplies him with the last 2 years income tax returns, bank statements, W2’s, etc. The lender asks about employment and runs a credit report. A pre-approval helps take the guesswork out of buying. There is a firm figure that you, the purchaser and seller can work with in confidence. Securing the commitment from the mortgage company is much closer to reality with a pre-qualification than with a pre-approval - which is of tremendous benefit during deal negotiations. By speaking with a lender, affordability parameters and required to close are also determined which is essential information.

The Final Stage is the Mortgage Commitment Letter:
A lender will issue a loan commitment after it has approved both you and the property you intend to purchase. Having examined all of the necessary documentation to verify your ability and willingness to repay the loan, your loan representative will submit your complete application to the underwriter. The underwriter will return one of four decisions: approval, approved with conditions, suspended (which means they need more documentation from you before they can make a decision), or denied.





Purchase of Sale Agreement: Issue 2