The Difference Between a Pre-Qualification and a Pre-Approval and How Credit affects your Albuquerque Home’s Mortgage

The Difference Between a Pre-Qualification and a Pre-Approval and How Credit affects your Albuquerque Home’s Mortgage

(Transcript Snippet): “Tego:

Let’s just discuss that real quick. What’s the difference between a pre-qualification and a pre-approval for example? Sure.

Lee:

So a pre-qualification is going to be where, where the, the loan officer will pull the credit. Okay. A true pre-qualification. They should pull the credit and analyze the li bill, take a look at the income really, you know, understand what that income looks like. And take a look at the assets, make sure that they have sufficient funds to close, to get to the closing table. And and based on that information, run it through Aus, which is automated underwriting system. Okay. Which most lenders should run their, their files through. And as long as that all checks out, then you can issue a pre-qualification letter.

Tego:

Okay.

Lee:

Okay. Got it. Versus a pre-approval where it takes it a step further where it takes all that information actually submits it to an underwriter who then reviews the file and issues a conditional approval. Right, right. And condition based on, okay. Everything looks good here. We’re just waiting on an appraisal at that point.

Tego:

Got it. Got it. And, and you, you said credit and just made me think about it. Sorry. I, I pulled this up here cuz you know, following our show is Michael Ramis with credit rescue credit, New Mexico. Yeah. So, so Michael does his show and, and, you know, helps people clean up their credit when you guys price or not, you guys let’s, it’s not really you that price it, but your credit score will affect how much your mortgage rate’s gonna be circle this all the way back to absolutely mortgage rates, right? Yes. So, you know, when you see mortgage rates get being quoted out there and let’s say their loading ’em at let’s see 3 75 or something, right. For, for people to get the very best mortgage rate, what, what kind of credit score do they need to have

Lee:

Seven 40 is, is seven 40 plus is where you want the very is where you want the credit score to get

Tego:

That’s the magic number

Lee:

Number. Yeah. And so, you know, rates, and I’m glad you brought that up cuz you’re right. When you know, there’s, there’s a lot of competitors out there that are throwing rates out there that are saying, oh, that we have these super low rates, but there’s a lot more to it. One, you know, are there any points associated with that? Right. We can talk that, talk about that, right. Yeah. Yeah. But there’s also, what’s called loan level pricing adjustments where credit makes a difference, how much you’re putting down, whether it’s a purchase or refinance the type of, of home, you know, single family versus multi-unit sure. Versus condo versus

Tego:

Second home versus investment. Yeah. So

Lee:

All those factors come into play on how they’re gonna price your rate out. But credit is a big factor in that. More so on conventional loans, conventional loans are very credit sensitive. Okay.

Tego:

Just in real quick, in a couple minutes we have less conventional versus like FHA. What’s the difference?

Lee:

Conventional would be Fannie Mae. Freddie Mac. Okay. They’re government backed. Yep. Okay. so they’re private entities, right? Okay. They’re the biggest you know, six, what is it? 65% of mortgages in the United States are backed by Fannie or Fred. Okay. Okay. Then you have FHA, which makes up about 20%. Okay. Okay. And those are government mortgage HUD. Right. Okay. And then you have VA, which is about 10%. Okay. Okay. And those are for exclusive for veterans, probably one of the best loan programs out there. They are

Tego:

Loan program.

Lee:

They a hundred percent fine financing. Yep. And then you have U S D a, which is a small percentage. And then after that you have maybe portfolio and non-traditional types of mortgages.

Tego:

So yeah. And I know there’s like hard money and portfolio. Do you lump hard money in portfolio kind of together? Kinda.

Lee:

Yeah. Yeah. Just kind of like the non-traditional hard money portfolio, that kind of thing.

Tego:

Yeah. So, so a certain extent those type of loans are your traditional bank loans. Right? They, they actually hold those loans. They hold on the balance sheet of, of the bank or whatever

Lee:

Themselves, instead of Fannie Mae, Fred Mack, FHA, ensuring those, the go.