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#1724863 - 07/30/12 05:32 PM Prequalification vs Preapproval
WHEDA Offline
100 Club
WHEDA
Joined: Apr 2009
Posts: 189
Wisconsin
It's my understanding that a prequalification typically informs a consumer of an estimated PITI payment that would be considered affordable for them based on their employment history, income and other debt payments. The income may be "stated" or documented via paycheck voucher and/or W-2s, if the consumer happened to bring them in and the debt payments may be "stated" or the MLO might, with permission, pull a credit report. In other words, an informal, verbal or face-to-face conversation. A preapproval is more formal requiring the consumer to complete a 1003 with information other than property address, and an estimated property cost, provide paycheck vouchers, W-2s and tax returns, 2 months of bank and/or investment account statements, and authorization to pull a credit report.
Assuming my understanding is correct, which does your shop offer? Are prequalification letters accepted by Realtors and sellers in your area, or do they require a preapproval?
If a consumer were to state they want to purchase a property costing $100,000, they have $2,000 in liquid assets and "hope" to get down payment assistance (DPA) for the balance of funds needed to close, does your shop require a commitment for the DPA or condition the preapproval (assume excellent credit and sufficient income)?

Thank you.

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#1725153 - 07/31/12 01:18 PM Re: Prequalification vs Preapproval WHEDA
Beagles22 Offline
Power Poster
Joined: Jan 2004
Posts: 3,626
State of confusion
If you are HMDA especially, you need to really think about which you will do. We ONLY offer prequalifications. Preapprovals mean you have a formal preapproval process, which we choose not to have. We have never had an issue with a realtor asking for one, they really don't see a difference. We do an informal letter saying 'based on the information provided you are prequalified for the following'....and give very general terms, but there are a lot of 'out' clauses in it saying that the clients entire situation has not been taken into account. Just what we do, not saying it is what everyone should do, but FDIC is happy with it so far.
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