Mortgage pre-approval and pre-qualification are the two names for the letter a buyer attaches to an offer to show a seller that a loan is likely behind it. California Mortgage Solutions, an independent mortgage broker in San Luis Obispo, writes the pre-qualification letter a listing agent in San Luis Obispo County asks to see. The two words are used loosely and lenders mean different things by them. This page sets out what each one is, what our letter states and does not, and what we ask for to write one.
Pre-qualification and pre-approval are two names for the same kind of letter: a lender's statement that it is generally willing to lend to you, up to an amount, on assumptions it has made about your income, your savings, your debts and your credit. The Consumer Financial Protection Bureau says lenders use the two words differently. Some write a pre-qualification letter from information you report and nothing verified, and keep the word pre-approval for a letter written from verified information. Others use one word for everything. Neither letter is an offer of a loan that the lender is bound to make, and a lender may check your credit before writing either one. So the word at the top of a letter says less than what the letter states and who stands behind it. On this site the letter a loan officer writes is a pre-qualification letter, whatever was checked to write it, because nothing here is underwritten until a lender underwrites it, and the letter says so.
The letter states that a loan officer has reviewed what you told us and, where you agreed to it, your credit, and that a loan of a stated size appears to fit your file under a program we named. It is addressed so a seller or a listing agent can read it, and it carries the brokerage's name and license numbers. It does not say that a lender has approved you, because none has yet. It is not a commitment to lend, and it does not lock a rate. It does not bind you to any lender either: the CFPB's buying guide says the same of every such letter, and the lender is chosen later, when an offer is accepted and the Loan Estimates are in hand. A change in your income, your debts or the price of the house changes the answer. Each letter states the date it was written, and a listing agent may ask for a fresh one if an offer comes later.
Sellers often ask for a letter before they take an offer seriously, as the CFPB's buying guide notes, and a listing agent reads one for three things: whether someone with a license has looked at the buyer, whether the loan amount covers the offer, and whether the program named is one that closes in this market. In San Luis Obispo County that last point matters, because a price above the county's conforming limit calls for a jumbo loan, and a letter that names the wrong program tells the agent the buyer has not been placed yet. A letter from a brokerage also tells the agent that more than one lender is in play.
Who you are and where you work, what you earn and how it is paid, what you have saved and where it sits, and what you owe each month. With your permission, your credit. For a first home we also ask whether you expect help with the down payment, because that shapes which programs fit. None of it has to be perfect on the first call, and you can start with the application on this site, which asks the same questions in order. A loan officer reads the answers, and if the file supports a letter, writes one and tells you which program it rests on and why. Ask what was assumed to write it: the CFPB's advice to every buyer is to find out whether anything in the file could change the answer later, and that is a fair question to put to us.
Sometimes a letter would not hold up, because the income is too new, the debts are too high for the price, or the savings are not where a lender needs them to be. That is a better thing to hear before an offer than after one. A loan officer will say what would have to change and which program would then fit, and the application can be picked up again when it has. If the reason sits on your credit report, the CFPB's advice is to get a copy, look for errors and have them corrected before you try again. A letter the file cannot carry fails in underwriting.
The steps in order, so you can see what is coming.
Income, savings, debts and the price range you are shopping in. The application on this site asks for each in order, or a loan officer can take it on a call.
Credit decides which programs are open to you and on what terms, so a letter written without it says less than one written with it.
If the file supports one, you get a pre-qualification letter naming the program and the amount. If it does not yet, you get the reason and the path.
When an offer is accepted, the same loan officer takes the file to a lender for underwriting, which is where approval happens.
If yours is not here, call us. The useful answer depends on your file.
Both are a letter from a lender saying it is generally willing to lend to you up to an amount, on assumptions about your income, savings, debts and credit, and the CFPB says lenders use the two words differently. Some lenders write a pre-qualification letter from information you report without verifying it and reserve pre-approval for a letter written from verified information, while others use one word for both. Neither letter is an offer of a loan that the lender is bound to make, so read what the letter states and who signs it rather than the word at the top.
We write pre-qualification letters, and we call them that. A loan officer reviews what you tell us and, with your permission, your credit, and if a loan appears to fit your file under a named program, writes a letter a seller or a listing agent can read. Approval itself happens when a lender underwrites the file after your offer is accepted, and a letter from any source is not a commitment to lend.
Each letter states the date it was written, and the CFPB notes that such a letter can carry an expiration date, which is why many buyers wait to ask for one until they are ready to shop in earnest. A letter is only as good as the facts behind it on the day it was written: a change in your income, your debts, your savings or the price of the house changes the answer, and a listing agent may ask for a fresh one when an offer comes later. Ask your loan officer for a new letter rather than reusing an old one.
Our letter is written after your credit is pulled. The application opens in our loan system without a credit pull; the pull comes later, and only if you ask for it. A letter written on pulled credit says more to a seller than one written on what a buyer reports, and that pull is recorded on your report as an inquiry. The CFPB says an inquiry from a lender typically has a small negative effect on your scores, and that several mortgage lenders checking your credit inside a short window are recorded as a single inquiry, which is what lets a buyer talk to more than one lender without a second mark for each.
Government-insured
Government-insured, with credit score tiers HUD publishes.
Not government-insured
A loan for solid credit and income, with private mortgage insurance that does not have to be permanent.
Above the conforming limit
For a loan above the county's conforming limit, where each lender writes its own guidelines.
Where this fits:Buying a homeRefinancingAll loan programsThe Central Coast
Where it comes up in the county:San Luis ObispoPaso RoblesAtascaderoTempletonMorro BayLos OsosCambriaArroyo GrandeGrover BeachPismo BeachNipomoSanta MariaOrcuttLompoc
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This page is general information, not an offer of credit or a commitment to lend. What a lender will do with a file depends on the file.
Answer a few questions and your loan officer can talk you through what fits, including when this does not.
No credit pull to get started. This is not a commitment to lend. Equal Housing Opportunity.
