The Art of Negotiation: The Give-And-Take of the Offer Process - Quicken Loans Zing Blog

If you’re shopping for a home, you’ve likely been told that you need to prequalify or get preapproved before you can get a mortgage. While some use these terms interchangeably, these are usually two different steps when applying for a mortgage. This can make it difficult when trying to understand the important differences between them.

Both steps are meant to help give home buyers a realistic idea of how much they can afford when shopping for a home. Prequalification is typically the first, less committal step that uses some information you provide to give you a rough idea of the mortgage amount you could probably qualify for. Preapproval is a conditional mortgage commitment based on verified consumer documentation. A preapproval is usually more valuable because it means the lender has checked your credit and verified your documentation to approve a specific loan amount (usually for a certain amount of time, such as 90 days).

However, what each term means can also depend on which lender you’re talking to. Because of this, you need to be absolutely clear about what your prequalification or preapproval actually means.

Let’s compare preapproval vs. prequalification in depth, then stick around to learn about the Power Buying ProcessSM from Quicken Loans® and how it helps clarify this process with three levels of approval.

Prequalification

To get prequalified, you typically need to supply your bank or lender with things like your debt, income, and asset information so they can get an idea of your financial situation. Your lender is then able to give you an estimate of how much you can likely borrow.

Although lenders have varying policies, there are a few things that are common to the prequalification process.

When you apply for prequalification, it can be done online or over the phone and is typically free. You should be able to get a prequalification in less than a day.

You’ll be asked to share information on your income and asset in either verbal or written form. You’ll also share information on current installment debt like car payments and student loans as well as revolving debt like credit cards. If a lender is being thorough, they’ll likely want to verify this last piece by pulling your credit report. In addition to giving them an idea of how much you can afford, having access to your credit scores shows them what loans you might be able to qualify for. For example, an FHA loan has a minimum median FICO® Score of 580, while you need a 620 to qualify 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 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, there are a few items to keep in mind.

  • The loan amount is merely an estimate at this point because your income and assets aren’t verified in a prequalification.
  • Because nothing is verified, for the estimate to be of any use, you’ll want to give the lender information that’s as accurate as possible regarding income, assets and credit.
  • Real estate agents and sellers may not look at a prequalified buyer as seriously as someone who has taken the next step to get their information verified – traditionally called preapproval. People feel more comfortable moving forward if they know with certainty that you can afford the offer you’re making.
  • Prequalification and preapproval status will be one of the first things sellers and their real estate agents ask you about, so you’ll want to show that you seriously looked into financing at the very least if not had it already lined up.

Prequalification FAQs

Does it cost anything to get prequalified?

It depends on the lender. Quicken Loans doesn’t charge for Prequalified Approvals.

How long does it take?

It should take less than a day for a prequalification.

If I get prequalified, does that represent how much I can afford?

Because no info is verified, the prequalification only represents an estimate. The accuracy of this estimate will depend on the accuracy of the information you give the lender verbally or in written form.

Preapproval

The next step is to get preapproved, and it’s usually more involved. 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 weaker, the lender could just mean they pulled your credit and got a verbal estimate of your assets and income.

If your lender has done the right thing by pulling your credit as well as verifying your income and assets, it’s a strong preapproval. This will give a much more definite idea of what you can afford before you go house shopping.

Although your mortgage application isn’t officially completed until you submit a property address to your lender, it’s worth noting that you’ll be submitting much of the documentation for the rest of the application at this point, so make sure you have the paperwork mentioned above readily available to you.

Although Quicken Loans doesn’t charge you to find out how much you can afford, there are sometimes charges associated with preapproval. Ask your lender for details.

Getting a more definite preapproval puts you at a distinct advantage because you’ll know exactly how much you can afford, and then you can shop for homes at or below that price.

Every lender has different policies, but at Quicken Loans, Prequalified Approvals and VerifiedSM Approvals last 90 days.

Prequalified vs. Preapproved: A Brief Summary

FAQs Prequalification Preapproval
Do I need to fill out a mortgage application No. No information is verified, beyond possibly credit and debts.

 

Yes. This will be completed when you get the property address.
Do I have to pay a fee? Maybe. Ask the lender.

 

Maybe. Ask the lender.
Will it affect my credit score? Only if they take this step of pulling your credit rather than relying on your estimate.

 

Yes. There will be a credit check.
Is it based on a review of my finances? No. In a proper preapproval, income and assets are verified.

 

How long will it last? Lender policy varies. At Quicken Loans, 90 days

 

Lender policy varies. At Quicken Loans, 90 days
Does it require a down payment estimate? You may get one if they ask about assets.

 

Lender will review assets to determine affordability.
Will I get an estimated or specific loan amount? Estimated

 

Specific
Will I get interest rate info? Maybe, based on estimated or actual credit score and estimated down payment. Yes, at the very least, the interest rate will be estimated based on current market rates.

 

Does Prequalified or Preapproved Mean Approved?

Prequalification and preapproval both give you a letter from a lender that specifies how much they are likely willing to lend to you based on certain information. These letters are not guaranteed loan offers.

The main advantage of completing both steps before you start your home search is that you’ll get a good idea of what you can actually afford. It also shows you’ve done the legwork to talk to lenders about obtaining mortgage financing which can indicate seriousness. However, 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’ve made an offer on a home and had it accepted, you’ll submit the purchase agreement to your lender of choice. Once they get the address, your mortgage application is officially complete and you’re moved to the next step of the process in which your income and assets are looked at again during a complete review of your loan file.

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.

At this point, you’ll receive a loan commitment from your lender. This may or may not be conditional on the verification of certain other documentation and/or getting issues resolved with the home you’re buying, but you can expect to get a closing day and be well on your way.

As you’ve seen though, not all mortgage approvals are created equal. How can you cut through the clutter and tell the difference?

Our Power Buying Process SM

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. Those three levels are:

  • Prequalified Approval — We pull your credit and ask for estimates of your income and available assets in order to calculate your DTI, and let you know what you can spend. The best way to think of this is as an estimate.
  • Verified ApprovalSM — In addition to a credit pull, you give us income and asset documentation. Your Verified Approval Letter should give you the absolute confidence you need to back up the offer you’re making. If you don’t close based on our review of your documentation, we’ll grant you $1,000.1 This gives your offer strength on par with that of a cash buyer because the seller will know you’re good for the financing.
  • RateShieldSM Approval — We lock your interest rate for up to 90 days while you shop for your new home. On the day you submit your purchase agreement, we’ll compare the rate you initially locked to current market rates. If rates go up, your rate stays the same; if rates go down, your rate drops. Either way, you win.

Learn more about our Power Buying ProcessSM or visit Rocket Mortgage® by Quicken Loans®  if you’re ready to start. One of our Home Loan Experts will also be happy to work with you if you give us a call at (800) 785-4788. If you have any questions, you can let us know in the comments below.

1Participation 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.

2RateShield 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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