Most prospective home buyers know that they should get pre-approved for a mortgage. This should happen before they start to consider all their home loan options and make an offer. While lenders will often use the terms “pre-approval” and “credit approval” interchangeably, home buyers should know the difference. This will put themselves in the strongest position possible when it comes time to make an offer. Here’s what we know about pre-approval vs. full credit approval.
Pre-approval vs. Full Credit Approval
Pre-approval typically means that a mortgage loan advisor has reviewed the income, assets, and credit of a prospective buyer and that the buyer appears to meet guidelines for mortgage financing. The advisor will then write a letter confirming the pre-approval of the prospective buyer.
Full Credit Approval
Full credit approvals are more involved than simple pre-approvals. The lender must collect the income and asset documents from the potential buyer, pull credit scores, and have the file reviewed by underwriters.
This is a more thorough process. Oftentimes the lender will be able to provide a persuasive letter to the buyer related to their credit worthiness. From the seller’s perspective, it provides more reassurance and reduces some of the perceived risks associated with a buyer’s financing.
Not all lenders offer full credit approvals before getting a home into contract, though. If a lender does offer a full credit approval, they will probably require a fee for it.
When talking with a potential lender, be sure to ask if underwriters will actually review the file. Historically, lenders didn’t finish underwriting reviews until after the buyer had identified a property and all parties had signed a sales contract. A full credit approval simply moves the initial underwriting review to an earlier point in the process. This would happen before identifying a specific home and an offer accepted.
Getting full credit approval helps the buyer know their maximum budget with more certainty. It also strengthens their offer and can simplify the process after the home is in contract, since some of the underwriting is complete.
In a really competitive market such as Seattle, where competition with other sellers for a specific home is high, approval is crucial.
When you work with Seattle Mortgage Planners, you don’t need to worry about confusing lender jargon. We’ll find you the right loan with the right rate, and ensure that the lender provides full credit approval early on in your search for a new home.
Book some time with us to start this exciting process!
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