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What’s the Difference? Pre-qualification, Pre-Approval, & TBD Approval

When buyers begin the process of looking at homes, often, the first step they are told is that they need to get preapproved for their new home purchase. While most borrowers don’t fully understand the differences in the types of preapprovals, here are three main ways for a home buyer to get preapproved for their new home.

The methods are Preapproval, Prequalification, and 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.

Pre-approval: 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 that all the information in the application matches the actual documents collected. 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.

Pre-qualification: 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 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 it to our underwriters to examine the file. This TBD approval is just as good as a cash offer. 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.

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