What constitutes a pre-qualification vs. a pre-approval? What disclosure requirements exist for each. I'd really appreciate your help.

Anyone? Please, I'm desperate.

I think a pre-approval is when the credit is pulled on the customer and all steps are taken to qualify them - with the exception of an address. VODs and VOEs are used, etc. A pre-qualification is where the lender just takes basic information - income, debts, etc. - and tells the customer how much they may qualify for.

Here is my specific situation, customer wanted to be pre-approved. Application is taken, paystubs obtained, bank statements obtained, credit pulled but there is no property yet. Is this a pre-qual or pre-approval. And what disclosures are required in this instance. I'm thinking just the GFE but I'm not sure.

The GFE is only required after a specific property is located. From some training I've attended we were told you must have 'dirt' for RESPA to be applicable. For the pre-approval to be HMDA reportable, you must have a program and issue commitment letters, which we do. If you went through all of the rigamarole (spelling) of an approval without the property, it sounds as though this is a pre-approval.

I would agree with Skittles on both posts. However, I think this confusion will continue, because the terms "preapproval" and "prequalification" have at times been used interchangeably. I was once at a seminar where a compliance attorney who was presented as an expert used the two terms interchangeably. Someone finally called him on that, and he replied, "What's the difference?"

I use the terms to describe two different types of activities. In my mind, the continuum of activity is inquiry - prequalification - preapproval - application.

You've probably already seen this, but if not, here's an FDIC publication about mortgage prequalifications that may help you.

To be considered a pre-approval a committment letter must be issued for a set amount of money, and be "good through" a certain date (usually 90 days). A pre-qualification is simply pulling the credit, getting income information and conveying informally how much of a loan the customer could probably qualify for. We sometimes do these pre-qual's in writing and they are clearly marked as a Pre-Qualification, not a Pre-Approval.