Differences between between a Preapproval, a Prequalification and a TBD approval.
When buyers begin the process of looking at homes often the first step they are told is they need to get preapproved for their new home purchase. While most borrowers and realtors don't fully understand the differences in the types of preapprovals, there is actually more than meets the eye for different preapprovals.
There are three main ways for a home buyer to get preapproved for their new home. The methods are a Preapproval, a Prequalification and a TBD approval. These methods all carry different levels of strengths in terms of their weight for an offer. The strongest is TBD approval followed by a preapproval and lastly a prequalification.
- Preapproval: You will turn in an official mortgage application during this process, and will provide us with all of your financial documentation – including having your credit pulled. We will examine the documents to validate all the information in the application is matching to the actual documents collected. Our team will examine the information and credit rating to help determine the program types and maximum payment the buyer would be approved for on their home purchase. A preapproval is not a guaranty for a mortgage as you still need to have an underwriter sign off on all items for final approval. Also, we would still need an appraisal, title work etc.
- Prequalification: This is the easiest and quickest method to getting an idea of what you can afford for your new home purchase. It also carries the least amount of weight for your offer on your new home. This lets the buyers know roughly how much they can afford based on financial data provided by them to us, the lender. It does not include a credit check and does not constitute a commitment to lend to the buyer.
- TBD Approval: This is the strongest and best method for a buyer to use for their pre-approval process. With this method, we actually get a full application, income, asset etc for the file and submit to our underwriters to examine the file. The buyers are fully underwritten for credit and income and given a hard approval for their maximum monthly mortgage payment allowed with the approval. The process typically takes a couple days but allows the buyers to able to do a quick closing and present an Approval letter with their offer rather than a preapproval letter. A buyer CAN be pre-approved while waiting for the TBD approval to be completed.
New home buyers, sellers and realtors in Minnesota who understand the differences of the three 'preapproval' methods can achieve a leg up on their competition for buying or selling a home.
Please don't hestitate to contact us today and get your preapproval process started. Our office are located in Edina, MN and Duluth, MN. We do service the entire state of Minnesota.
Ben Coulter | NMLS#383046
612.384.7818 | Ben@UptownFinancial.com
4445 W. 77th St. Suite 160