There is a significant difference between a pre-approval and a pre-qualification. If you're in the market to purchase a home - and now is a perfect time with industry low mortgage rates and an $8,000 federal tax credit for first-time home buyers - you should contact a licensed mortgage broker as soon as possible to get pre-approved.

A pre-qualification is simply a letter issued to a borrower who is interested in purchasing a home. This pre-qualification letter indicates the size of a mortgage loan that you can manage to pay on a monthly basis, which is a determination based on monthly income and any outstanding recurring debt. Even if a pre-qualification letter is issued, it must not be mistaken for a commitment to lend. The pre-qualification letter simply indicates to a seller that you are financially qualified to make an offer on a home.

A pre-approval is a level above a pre-qualification letter. A pre-approval includes the verification of employment, credit history, down payment, etc. Once this information is validated, the mortgage application is submitted to a credit officer (underwriter) to make a final decision. Once approved by an underwriter, a pre-approval certificate (commitment to lend) is issued. This commitment to lend allows for borrowers to close very quickly once a home is found. When a borrower has a commitment from a lender, it can drastically improve the negotiation of a sales price with a seller since it is as close as a borrower can get to actually having the cash in hand to pay for a home.

Robert Hyder, Total Mortgage Services, LLC
326 West Main Street, Milford, CT 06460
Phone: 203.876.2200 Fax: 203.783.5632
http://www.totalmortgage.com
Twitter: http://twitter.com/totalmortgage

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