There are a lot of different types of pre-qualifications and pre-approvals. In doing some research on this I have found that there are three different levels of pre-approvals that lenders in Maine provide. It is important all parties to know which one of the three you have as it will indicate how strong the buyer is.
Some lenders will provide a letter of pre-approval without even running the borrowers credit, which at that point is just a good guess.
Other lenders will do the credit report but do not run the LP or DU findings which are the automated underwriting for conventional, FHA, and VA loans. RD has their own system. This would be an educated guess.
Last but certainly not least is when the lender has received the documentation such as income taxes for self-employed borrowers, pay statements, bank statement to show assets and other relevant information. This is truly a pre-approval at that point.
Closing a loan is simply the elimination of all the variables. Going forward when I issue a pre-approval letter it does not mean I have seen all the buyer’s financial information. However, when I meet them, I will be asking for it. Once I have reviewed it and entered it all into the electronic underwriting. I will then give you an email stating that, I have a full approval. This will make your offer in what is sometimes a competitive situation stronger and result in a higher percentage of closings for all of us.
Once last thing, however. Under the Dodd-Frank legislation I cannot require that a borrower give me their documentation. So, I cannot provide this email in all cases. A borrower actually has eleven days after the full application to accept the terms and give us the supporting documentation.