Loan pre-approval is a halfway step between identifying a property for an exchange and taking out a loan to assist in an exchange that requires borrowed capital. Here, we will explore two aspects of pre-approval to help you better understand what the process is and how to get pre-approved for loans with the most favorable terms: (1) the difference between pre-qualification and pre-approval, and (2) variables considered in loan pre-approval.
Pre-Qualification vs. Pre-Approval
The pre-qualification process is much less formal than the pre-approval process.
When pre-qualifying for a loan, a loan officer will gather your relevant information such as annual income, bank information, desired down payment and mortgage amount, and a provisional credit check. Pre-qualification results are often immediate.
When seeking loan pre-approval, prospective borrowers must then provide documentary proof of their given information, such as copies of pay stubs from the past 30 days (income), bank statements (bank information), down payment verification, tax returns, and employer-signed W-2s from the past 2 years. Pre-approval can sometimes take 10 business days or more due to the strict nature of verification for this process.
Variables Considered in Loan Pre-Approval
Loan officers consider several things when considering a prospective borrow for loan approval, including:
- Ability to repay loan
- Likehood to repay loan
- Property value
- Source and amount of funds for down payment.
Use this information to get pre-approved for a loan that contains favorable terms for the borrower. If you need help considering your financing options, schedule a meeting with our in-house mortgage experts today.