Mortgage Resources

Pre-Qualification
VS
Pre-Approval!
Do you know the difference?

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New Jersey
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Pre-Approval vs. Pre-Qualification

After a review of your pertinent information a Pre-Qualification or Pre-Approval letter may be submitted to a buyer. However, there has been some confusion regarding the difference between a Pre-Qualification and Pre-Approval letter. If you have received one of these letters the following guidelines may assist you to determine whether a Pre-Qualification or Pre-Approval letter has been issued to you.

A Pre-Qualification letter will state that "based on the preliminary information provided by you..." or "subject to our underwriter's final approval..." This letter is qualifying your client for a specific mortgage amount, not approving him for financing. This letter is to he used as a guide for your client to pursue a home that is affordable.

A true Pre-Approval letter will be a letter of Approval offer home financing "subject only to an appraisal on the property..." A homeowners mortgagee insurance clause will be included, and the mortgage company should have disclosed the terms of the mortgage in a Truth in Lending and Good Faith Estimate after you apply, If this information is not present, the letter should be considered a pre-qualification NOT a pre-approval.

NJ Department of Banking Commission rule states… "The word Commitment cannot be used if a mortgage loan is processed without a real estate contract of sale"

Hopefully the above information will clarify some questions that have arisen in the past. As always, we are available to discuss this issue in detail with you at your convenience. In addition, if you have received a "pre-approval" we would be happy to review your current letter to verify its validity, and to avoid any misconceptions or disappointments.

Please contact us with any questions that may arise with regard to this or any other issue regarding home financing.
973-509-9500

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