Pre-Approval Will Be a Term of the Past Starting in October 2015

Because of the cost involved and strict restrictions required, the word "Pre-Approval" is pretty much gone from the vocabulary of most lender letters. With the implementation of TILA-RESPA Integrated Disclosures (a.ka. TRID), lenders will not be able to use this term unless every loan in the company's pipeline (with or without a contract) is underwritten by a certified underwriter that follows specific and detailed guidelines. In the place of "Pre-Approved," you will see Lender Conditional Qualification Letters that are limited in wording aligned with the new guidelines. The word you need to know is "Pre-Qualified."

Pre-Qualified: Defined

A Pre-Qualification is typically considered when a lender has verbally discussed income, available cash for down payment and/or payment of closing costs, debt and other assets with a potential buyer. A Loan Officer will pull the buyer’s credit report to review and confirm financial details and credit score to determine the buyer’s qualification for a loan.

As a buyer, getting pre-qualified gives you a range of how much you might be eligible to borrow. This is not a guaranteed amount, but can help you sort and search available properties on the market within your budget and gives you a powerful tool when it is time to make an offer, especially in a competitive market. Sellers generally prioritize offers from buyers who are pre-qualified over those who are not.

A good pre-qualified letter will have the term "Reviewed.” This term formalizes what you can actually afford to purchase, validated by a certified professional, like a Residential Mortgage Loan Officer. The better the reputation of the lending company and Loan Officer, the stronger your pre-qualified letter will be received in the market. An experienced listing agent can give you guidance in this area.

Our clients are often awarded contracts in multiple offer situations because of our reputation in the marketplace and commitment to our local community.

Contact us today for additional information and assistance on how to get Pre-Qualified.