Pre qualification vs. pre approval vs. final approval? In mortgage lending these terms are often used interchangeably or flat out mis-used. It is important to make sure you understand the difference. As mortgage guidelines have tightened up in the last 18 months, it is even more important that you get a thorough approval completed AT THE BEGINNING of the mortgage process. This will allow you to shop for a home with confidence and may help strengthen your position when negotiating for a home.
Pre-Qualification: an estimage of how much you can afford in a mortgage payment. It is based upon the information you provide and is subject to the full documentation and verification process, including items such as credit report, appraisal, and income verification.
Pre-Approval: A commitment made by the mortgage company which should include a credit, income, employment and asset verification, basically everything done for a final approval except for the appraisal and title search.
Final Approval: all verifications completed and copies of all supporting documentation are obtained and reviewed including satisfactory appraisal and title work on the specific property you have contracted to purchase. It is also probable that there will be a re-check on all borrowers credit report before closing as well to insure nothing has changed or no new accounts have been opened that were not disclosed on the application.