Pre-qualified, pre-approved, fully underwritten – there are different types of mortgage pre-approvals for a home loan. What do they all mean? In this blog, we break down the home loan process, including the different types of mortgage pre-approvals. By doing this, we help you as a buyer make the strongest offer possible so you are more likely to get your offer accepted. Likewise, if you are the seller, you should read this article too because it’s packed with information on mortgages.
Types of Pre Approvals for a Mortgage
Beginning in 2022, the CAR Contract (California Association of Realtors) added one of three options to select when you submit an offer to buy a home. They are the following: a) Pre-qualified b) Pre-Approved or c) Fully Underwritten.
- Pre-qualified for a Mortgage: A verification from the lender based on information the buyer submits.
- Pre-approved Mortgage: The bank independently verifies the information based on a credit check.
- Fully Underwritten: The lender has completed all of the underwritings prior to approval. The buyer is fully approved for a mortgage.
We strongly recommend our J+J Team Home Buyers are fully underwritten when they make an offer on a house. For more information or advice, please contact us today.
What are the Benefits of Being Fully-Underwritten?
1. Being fully-underwritten for a mortgage speeds up the closing process.
If you’re fully-underwritten, you can close in 15-17 days. Then, the only things left to complete are the verification of the property information, appraisal and title report. Comparatively, buyers who are only pre-approved for a mortgage might close in 25-30 days. Why should this matter? Most sellers prefer the fastest close of escrow possible because it frees up the equity they have in their home.
2. Fully-underwritten offers are competitive with cash offers.
In a sellers-market, we all know cash is king. As the buyer, you want to be able to be taken seriously in a bidding war. Fully-underwritten offers have a strong bank commitment. And with this, you’re able to waive financial contingencies. Offers without financial contingencies are more attractive to buyers because there are fewer opportunities for someone to back out of the deal.
After the underwriting process, we normally have the lender reach out to the listing agent after the offer is received. This helps reassure the seller of the financial confidence in the buyer. This shows how proactive the seller is.
3. The ability to put the exact amount of the pre-approval in the offer letter.
Just as equally important, we want to get customized pre-approval specific in the offer letter for the property you’re buying. You want the pre-approval price to match what you’re offering. Try to look at it like this: you don’t want the seller to know you’re approved for $2 million if you’re offering $1.5 million on a home.
Here are a few recommendations from J+J Team Homes.
As a Buyer, How do I Become Fully-Underwritten?
Because you’re doing the work upfront, it’s better for you to have all your financial documents in order. Underwriting can take 1-2 weeks. For this reason, when you are looking for a home, it’s important you get started early.
How do I find a Mortgage Lender?
When shopping for a mortgage, we ask our buyers to start at the bank where they have investment accounts. These banks normally give existing clients preferential rates. Many times it’s based on a direct correlation to how much you have invested. Because of this, banks may offer you a fraction of percentage discounts on your mortgage rate.
What Documents do I need to Provide a Mortgage Lender?
A Mortgage Lender will require two years of tax returns, W-2s, proof of employment, and all financial statements for proof of funds.
How Long Does the Mortgage Pre-approval Process Take?
Generally, pre-approvals and fully-underwritten approvals last 90 days. But, please check with your individual lender to make sure.
For more information or advice, please contact us today.
Thank you for reading our blog. In the meantime, keep checking back in with us. If you have any questions or topic you’d be interested in learning more about – leave us a comment below or on our social media. Or even better yet, reach each out to us directly. Finally, even if you aren’t in the market, we’d love for you to pass along our information to those who are on the lookout.