UNDERSTANDING THE DIFFERENCE BETWEEN: PREQUALIFICATION, PREAPPROVAL AND FULLY UNDERWRITTEN

Did you know…

Of the few open escrows that cancel, a majority of the time it’s due to the loan. 

Part of submitting a strong offer on your dream home is making sure that you and your realtor understand the RPA (Residential Purchase Agreement). 

On page 2, line item 6B where it says verification of loan application, your realtor can check 1 of 3 boxes:

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1. Prequalification is the lowest level of qualification. It’s very surface level and is more of a character assessment.

2. Pre Approval is when you fill out the loan application with your basic information, but you have not given your approval to let them run your credit.

    

3. Fully underwritten means that your credit has been run, your funds and employment have been verified and you have been fully approved. You can come in without a loan contingency, making it a stronger offer. 

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UNDERSTANDING THE RISK

In the event that you were not yet fully approved, but have removed the loan contingency, you could no longer use the lender’s disapproval as a legal excuse to cancel the contract and your initial deposit (typically 3% of the purchase price) is at risk.