What you ought to know (#3)...

What´s the difference between a "pre-qualification" and a "pre-approval"?

One of the first questions you´ll probably want to ask your client is if they have applied for a mortgage, or more specifically3; been pre-qualified or pre-approved. These terms sound the same, but there is a big difference between them. In both cases, the loan officer is trying to determine the borrowers ability and willingness to repay a mortgage.

A prequalification is typically no more than a 5 or 10 minute conversation with a loan officer, who asks about their job, how much they make, and what type of debt repayment they have. What the loan officer is trying to determine is the front end and back end debt ratios: what amount of house payment can they afford. This means little when you´re ready to make an offer, but does make sure you are looking in the correct price range.

If your client is serious about buying a property, they need to take the next step and get pre-approved. Pre-approval verifies all the information they provided in the prequalification process. The credit report is run to verify the amount of total debt, and to determine if their credit is up to par for a particular loan product. Income is also verified, and both down payment and closing cost funds are reviewed, to determine if the required funds are readily available. In essence, the pre-approval is a verified prequalification, but it is nothing less than what you, as a real estate agent, should be looking for with a new client. It shows you that your client is serious about buying a home, and you´ll spend less time "spinning your wheels".

Bottom-line, if you want to make sure you client can actually buy the house they are looking at, you should have them talk with Arrowhead Home Loans.