Pre-Approval v. Pre-Qualification, LO is telling me they are the same..

[AppleJacks]

Greetings:

I'm new to posting here but have been lurking for some time.  I have a quick question and would appreciate any feedback.  My husband and I are trying to buy our first home using USDA RD Gaurenteed loan.  We have the credit for it, income, the home is in an area that qualifies, we don't anticipate any problems at all with the loan itself (Good credit scores, no late payments, BK, foreclosures, high debt to income or debt to credit issues, stable employment, etc).  We contacted the LO that USDA said serviced out area last week and sent her over our information including W-2's, tax returns for last few years, pay stubs, bank statements, etc.  She did pull our credit because I have fraud protection and it alerted me.  On Friday she sent us a pre-qualification letter (to my husband, I didn't pay attention to it) and on Saturday we made an offer on the house we are interested in.  Now when I pull up the email I realize it states pre-qualification and not pre-approval.  I had my husband call her and she said, these days, the terms are used interchangibly.  Is this true?  I always thought a Pre-approval was better than a Pre-Qualification.  Now I'm concerned this may hurt our chances on our offer.  Our Realtor had a lot of questions as well.  I think she actually do take us through the pre-approval process because she had all of our information but the letter does not fully reflect that in my opinion.  So I'm just wondering if it's true that really both are the same now that LO are being much more careful about credit issues?

Also,  the house is on 17 acres (which have a huge barn and pond).  We were also told the value of the land can be no more than 30% of the appraised value.  From everything I've read, this seems true.  The house is 4/1.75 bath with an office and 2800sq ft.  Is there anyway to tell what the house itself would go for, ballpark figure, before the appraisal (separate from the land itself)?  I'm really worried we will pay for the inspection and appraisal just to find out the house isn't worth the $133,000 or so it needs to be in order to be qualified for this program, even with all the upgrades and finished basement.  Unfortunately this property does not have good tax records since it was part of a very large cattle ranch that is now being sold off in pieces. 

I would greatly appreciate any help anyone can offer.  Thank you.

[tooleman694]

These days pre-approval doesn't mean anything, but it does sound like you got a pre-approval.

But since it doesn't mean anything it is pointless to worry about it.

[AppleJacks]

Thanks so much for your prompt reply.  I know we are making the biggest investment of our lives and it should be a more difficult process than obtaining a credit card or car loan but, geez, I've had health issues that didn't stress me out as much as this and my husband and I are just getting started with the "fun."  I guess that's all part of the process for everyone.  All the "what if's" take the excitment out of it, lol.  I guess people going through it just have to remind themselves that it's all worth it in the end when you sitting in your own home.

[DallasLoanGuy]

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@AppleJacks wrote:

Greetings:

  I always thought a Pre-approval was better than a Pre-Qualification.

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the terms have historically been used interchangably

yes, preapproves is better that prequaled

but if the loan officer did a preapproval, but they just call it a prequal, then no worries. it is just semantics

[tooleman694]

When I got my pre-approval my file went to the UW with all the docs. At that point it was a real approval.

[AppleJacks]

Okay great.  Thanks for the input.  I guess now I just need to hope they accept and hope the site value is under 30%.

[MovingForward_2012]

To the person that said a preapproval/pre qualification doesn't mean anything. I have to respectfully disagree. Both letters allow you to view homes in your price range and make offers. Without one or the other, most realtors won't even work with you.

In this case, I do agree than more than likely the two terms are being used interchangeably. But typically a preapproval means that they have entered your info in the computer and the computer says approved. A preapproval means that the bank is committing to loan you the money pending underwriting, etc. A prequal just means that based on the info YOU provided, the bank will lend you the money but that is contingent upon the computer approving you, underwriting, etc. So you have another layer that you have to go through when pre qualified versus preapproved. But the LO took all of the info needed for computer approval so as long as it was run through the computer, you are preapproved. You can always ask your LO if he/she put that info in the computer and ask if the computer came back with an approval. That's perfectly fine and may help address your concerns. For me, I actually met my LO in person and watched him enter the information in the computer and run my credit and he conveyed that the computer said approved.

[tooleman694]

But it has not been seen by an underwriter, DU may like your file but the underwriter might find problems

[MovingForward_2012]

Yes. Both are still pending underwriting. You are definitely correct about that but if you get a preapproval because the computer said so, you know you are out of the woods from having to be manually underwritten or straight up denied because the LO missed something and thought incorrectly that you will be approved. My realtor actually asked me if it was a preapproval or prequal and then when I said I was preapproved, he blew out hot air and said that's great. My interpretation of that was that he had dealt with a lot of prequals where the deal fell through. He seemed relieved when I told him I was preapproved.

[tooleman694]

My builder makes everyone go thru underwriting before they will even start building