What’s in a Preapproval?

Often, I have borrowers approach me after they’ve visited their own financial institutions, claiming they’ve been pre-approved for a certain mortgage amount. However, if the bank hasn’t pulled their credit, they are simply taking the clients’ word as to what their financial situation is.

Banks normally do what is called a Pre-qualification at the beginning of the mortgage application process. Then, once the borrower has found a suitable home, they do a full approval for the mortgage. While this is helpful to the client because it tells them what they can afford, it can result in a lot of disappointment to the client. A pre-qualification takes into consideration assets and income as supplied by the borrower. What it does not involve is a credit score or verification of this information, so it can be unreliable. There have been many borrowers that have sat in front of me and told me they had amazing credit, only to discover they have a large collection they were unaware of on their credit report.

At The Mortgage Centre, there is no such thing as a pre-qualification. I do a full Pre-approval for all of my clients. Clients bring in their income statements up front and I pull a Credit Report from Equifax. If the client is what is considered “borderline” with income or credit, I will submit to a lender and Insurer with a ‘dummy’ property so that I know it is a definite approval. They also get the security of knowing that they will get a rate hold for 90-120 days while they shop for their perfect home.