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To an outsider, it probably seems like the mortgage industry specializes in really confusing lingo. Take the term preapproval as an example. The goal of the preapproval is to give home buyers a realistic idea of how much they can afford when shopping for a home.

The problem is even the term preapproval can mean different things depending on the situation and how lenders approach it. It can be a lot to figure out when you’re looking to buy.

In this post, we’ll compare two common types of mortgage approval for shopping – prequalification and preapproval – as well as their differences (if any). Then we’ll look at how the Power Buying ProcessSM from Rocket Mortgage® by Quicken Loans® helps clarify this cloudy mess with three levels of approval.

What Is the Difference between Prequalification and Preapproval?

The terms prequalification and preapproval are sometimes used to mean the same thing when it comes to getting a mortgage. However, the terms may also mean something different. It all depends on which lender you’re talking to. Because of this, you need to be absolutely clear about what your prequalification or preapproval actually means.

In the following sections, we clarify the most common industry uses for the terms prequalification and preapproval. Knowing the typical process involved will help give you some idea of what questions to ask so you know what your mortgage approval means.

Prequalification

In a prequalification, your credit is typically pulled so that the lender will get a look at your three-digit FICO® Score and report. This score is used to determine what loans you could qualify for. For example, the lowest median FICO® Score necessary between Equifax, Experian and TransUnion is 580 for an FHA loan and 620 for a conventional loan.

By viewing your report, the other thing a lender gets a look at is your total revolving and installment debts. Revolving debts are things like your credit card bills. Meanwhile, installment debts include student, personal and car loans.

Lenders will also ask you for verbal verification of any income and assets you plan to use to qualify for the mortgage. By comparing your debts to your income, lenders get something called your debt-to-income ratio (DTI). This lets them determine the monthly payment you can afford, which in turn gives them the maximum price of the house.

Because your income and assets aren’t actually verified for a prequalification, real estate agents and sellers may not look at a prequalified buyer as seriously as someone who has taken the next step.

Preapproval

If you’re preapproved, it could mean the lender has taken the extra step of verifying your income and assets. This is done by gathering things like your W-2s, tax returns, pay stubs and bank statements.

If the preapproval is a bit stronger, the lender could mean they pulled your credit and got a verbal estimate of your assets and income. The latter would be the same as a traditional prequalification.

We’ll get to the Power Buying ProcessSM, our solution for bringing clarity to your mortgage approval process, in a minute. For now, let’s answer a few more of your common questions.

How Long Does Prequalification for a Mortgage Last?

It’s hard to give you an across-the-board answer to this question because each lender has their own policies. At Quicken Loans®, our Prequalified Approval – our term for prequalifications – lasts 90 days.

This is also true for our Verified ApprovalSM, but more on that later.

Does Mortgage Prequalification Affect Credit Score?

When a lender looks at your credit report to determine your eligibility for financing and the kind of terms you can get, they’re required to tell the credit bureaus that you’re looking for a loan. They do a hard credit pull. Typically, this brings about a slight temporary lowering of your FICO® Score.

If you continue to be responsible with your credit – doing things like not utilizing more than 30% of your overall credit limit and paying your bills on time – your score should rebound relatively quickly.

It’s also worth noting that if you’re shopping around and pull your credit with several different lenders in order to check rates, and you do this within a 30-day span for the same type of loan, it all counts as one credit pull.

Does Prequalified Mean Approved?

As a home buyer, you should know that being prequalified or preapproved – or approved, in the case of Quicken Loans – doesn’t mean you’ve received official mortgage approval. Your income and assets will have to be fully verified by the lender. Once you find a house, it will have to be appraised to establish its value and make sure it meets basic safety and livability standards.

How should you think of your prequalification or approval? It’s best to think of it as giving you a good idea of what you can afford when you’re looking to put in offers on homes.

The purpose of a prequalification or preapproval is really to give both you as the buyer and the sellers a realistic idea of what you can afford. It also shows you’ve done the legwork to talk to lenders about obtaining mortgage financing which can indicate seriousness. As we’ve seen though, not all mortgage approvals are created equal. How can you cut through the clutter and tell the difference?

Power Buying ProcessSM

At Quicken Loans, we have three levels of approval in our Power Buying ProcessSM in order to more precisely specify the level of examination your mortgage approval has received.

Prequalified Approval

In a Prequalified Approval, we pull your credit to get your score and a look at your debts. Verbal income and asset statements help us calculate your DTI and let you know how much you can spend, but the best way to think of this is as an estimate. Because your income and assets haven’t actually been verified, it’s not as strong as it could be.

Sellers and their real estate agents prefer offers from people with verified income and assets. There’s just less chance that the deal falls through at the last minute. For this reason, we encourage everyone to get a Verified ApprovalSM.

Verified ApprovalSM

During the Verified ApprovalSM process, we pull your credit. We also have you share income and asset information with us. We promise to verify your approval amount within 24 hours of you getting the requested documentation back to us.

A Verified ApprovalSM Letter should give you the absolute confidence you need to back up the offer you’re making. In fact, if you don’t close based on our review of your documentation, we’ll give you $1,000.1

No one wants to pay more for a mortgage than they have to. One way to protect against that concern is to lock your interest rate when you see one you like so it doesn’t go up. However, until now, you’ve had to wait until you had a purchase agreement in place to lock your rate.

Available on 30-year conventional, FHA and VA loans, RateShieldSM Approval2 is intended to alleviate the interest-rate concern.

RateShieldSM Approval

With a RateShieldSM Approval, you can lock your interest rate for up to 90 days while shopping for your new home. Should interest rates happen to go down by the time you find your new home, we’ll lower the rate to the current interest rate, where you’ll remain locked, giving you time to close your loan. If rates have gone up, we honor the rate you initially locked. Either way, you win.

This gives you the ability to protect your monthly payment because your interest rate won’t go up. Your offer will also have the strength and confidence on par with that of a cash buyer because you’ll know you can afford the home. This makes your offer very attractive to sellers in the competitive housing market we have today.

Ready to give our Power Buying ProcessSM a whirl? You can get started online with Rocket Mortgage® by Quicken Loans®. If you’d rather talk to one of our Home Loan Experts, you can get in touch with us at (800) 785-4788. If you still have questions, go ahead and leave them for us in the comments below.

1 Participation in the Verified Approval program is based on an underwriter’s comprehensive analysis of your credit, income, employment status, debt, property, insurance, appraisal and a satisfactory title report/search. If new information materially changes the underwriting decision resulting in a denial of your credit request, if the loan fails to close for a reason outside of Quicken Loans’ control, or if you no longer want to proceed with the loan, your participation in the program will be discontinued. If your eligibility in the program does not change and your mortgage loan does not close, you will receive $1,000. This offer does not apply to new purchase loans submitted to Quicken Loans through a mortgage broker. Additional conditions or exclusions may apply. Verified Approval within 24 hours of receipt of all requested documentation. 

2 RateShield Approval locks your initial interest rate for up to 90 days on 30-year conventional, FHA and VA fixed-rate purchase loan products. Your exact interest rate will depend on the date you lock your rate. Once you submit your signed purchase agreement, we’ll compare your rate to our published rates for that date and re-lock your interest rate at the lower of the two rates for an additional 40 to 60 days. Quicken Loans reserves the right to cancel this offer at any time. Acceptance of this offer constitutes the acceptance of these terms and conditions, which are subject to change at the sole discretion of Quicken Loans. This is not a commitment to lend. Additional conditions or exclusions may apply.

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This Post Has 34 Comments

  1. I would suggest speaking with Chris Ransford at Quicken Loans, when looking for preapproval. Please tell him, “THANK YOU” for me from my purchase in 2017. He was FANTASTIC in the beginning and also helped again just before closing. GREAT guy and SOLID on his word!!

    1. We’re glad to hear you had such a fantastic experience! We’ll make sure this gets passed along to Chris. Have a wonderful day!

  2. hello i am looking to buy a home soon and get out of renting all my debts are currently paid including credit cards and my score is 689 and rising according to Capitol One. my question is does quicken offer USDA, or FHA loans AND WOULD I QUALIFY FOR EITHER ONE OF THEM?

    1. Hi Levi:

      We do offer both USDA and FHA loans. Based on your credit score, you would qualify, but there’s more to it than that. For example, USDA loans require that you live in a qualifying area. We can certainly help you look into your options. You can get an application started online or give one of our Home Loan Experts a call at (888) 980-6716.

  3. I would like to communicate with a gentleman named Gil< When I purchased my home Gil had gotten me pre approved for a home loan. I am now in my Seventies and I need to sell this home and move to a home closer to my son in Marble Hill, Mo. so he can look after me. The home next door to him will be comming up soon for sale and I would be interested in getting preapproved for a loan to purchase it. Please have (preferably Gill Gilcrest contact me via my email address so we may further discuss this situation I am in. Thank you so much for your kind assistance in this matter.
    Jesse Mitchell (Quicken Loans Customer)

    1. Hi Jesse:

      I’m going to get this to our client relations team. I’m glad you had a good experience with Gill and we would be thrilled to connect on your next approval. We look forward to talking to you soon!

  4. To whom it may concern:
    I was a little stressed out when I spoke to a gentleman online on the Rocket Mortgage app in May. According to him, based on the info I gave him I prequalified for an FHA loan for $122,000. I think he said the credit score he pulled up was 670. He said it was because of my debt to income ratio. I alone bring home $36,000 in Social Security. What’s deceiving is my credit report says I have about $130,000 in debt due to graduate school loans, but like my undergrad loans, I’m never going to be liable for any graduate loan repayment due to permanent disability. I think the gentleman used this to erroneously calculate my debt to income ratio. Right now I have NOTHING but $1500 in monthly rent that I pay. Our family’s goal, if possible, is to try to get a very modest FHA mortgage of $160-$190,000 for a home in North Carolina. We currently live in NJ. Just wondering what thoughts/advice you might have. Thanks!!!
    Tom

    1. I see that you are working with us, so I’m going to get this over to our team to go over all the options and see if there’s anything we can do for you here. Every situation is different, particularly when it comes to questions of whether certain debts can be excluded.

  5. I want to sell my rental property. My tenant wants to buy it. If tenant goes to Quicken Loans, how long will the prequalification take? How long will the preapproval take?
    Thank you!

    1. Hi Rosie:

      We don’t do pre-qualifications. We do preapprovals. It depends on how they do it, but they can share their income and asset information with us, check credit and be preapproved in as little as eight minutes through Rocket Mortgage. Hope this helps!

      Thanks,
      Kevin Graham

  6. I applied through Quicken because of the 580 min credit score for a FHA loan. I was denied and after talking with 2 people, the min score requirement is 620. Why does the company state 580 when you aren’t even considered for a loan under 620?

    1. Hi Ariel:

      The minimum credit score is 580. However, there are different requirements depending on your debt-to-income (DTI) ratio among other factors. That said, I can have someone reach out and look into your situation. If nothing else, we may be able to help offer advice.

      Thanks,
      Kevin Graham

    2. You wont evem get it then. Ours awaitech higher than that and they wamted $2300 to close. Of course they waited u til the day nefore to close and their payment wouid have been much higher than the place I am with now. DONT USE QUICKEN LOANS.

      1. I’m sorry to hear you’ve had this experience with us, Joy. I’m going to forward this to our client relations team so we can research your situation. Thanks for reaching out!

    1. Hi Samantha:

      I can’t really comment on how much you can be preapproved for on the blog. We would need to take a look and get more information from you. However, you can get a preapproval online through Rocket Mortgage or speak with one of our Home Loan Experts by giving us a call at (888) 728-4702.

      Thanks,
      Kevin Graham

  7. Just be aware that if you get a preapproval letter, the loan amount can still change or be revoked completely. This just happened with me with quicken loans. I was preapproved for 250k then reduced to 220k and then denied without a call from my agent. I found by an email with no explaination.

    1. Hi Michael:

      I’m sorry to hear you’ve had this experience. I’m going to get this to the right people so we can look into this and see if we can get it turned around for you.

      Thanks,
      Kevin Graham

  8. I’m making an offer on a rental. I have two loans with Quicken. Does Quicken offer pre-approval/pre-qualification for investment properties?

    1. Yes, Kenneth. We do full preapprovals. I’m going to recommend you talk to one of our Home Loan Experts by filling out this form or calling (888) 728-4702. We look forward to working with you again.

      Thanks,
      Kevin Graham

    1. Hi Larry:

      We can have someone reach out to you about your options. They’ll be in contact.

      Thanks,
      Kevin Graham

  9. Hi, I’m working on my credit score and would like to know who I can contact for a pre-approval. I’d like to know where I stand prior to looking for a home.

    1. Hi Rulonda:

      You’ve come to the right place. I’m going to have someone reach out to you about this.

      Thanks,
      Kevin Graham

  10. Hello, just wondering what the min credit score requirement was for quicken with a fha loan. Most companies I have come across are 640min.

    1. Hi Stefanie:

      Our minimum credit score for an FHA loan is 580. I’m going to have someone reach out and help you look into your options.

      Thanks,
      Kevin Graham

        1. Hey Omar:

          You’ve come to the right place! I’m going to have someone reach out and help you get started! Look for an email.

          Thanks,
          Kevin Graham

  11. my husband and I have a home we need to sell before purchasing a condo. May I get prequalified before our home sells.

    1. Hi Karen! I’ve passed this on to our home loan experts. They’ll reach out to you to discuss your situation.

    1. Hi Carla! You should check out one of our partners, My Perfect Home. It allows you to search for homes from the comfort of your current home! Once you’ve found one you’d like to purchase, we can help you get the mortgage process started. https://www.myperfecthome.com

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