To determine loan eligibility, the first step is to obtain a prequalification or pre-approval. During a prequalification, the loan officer takes the information that you give them and uses it to assess whether you qualify. A pre-approval works in the same manner except instead of taking the value of assets (funds for closing and down payment), income, and liabilities from the application, the loan officer will obtain bank statements, paystubs and/or W2, credit report, and any other documentation to prove what is on the application. Although it seems like a lot to get started, pre-approvals save time on the back-end as these documents would need to be submitted prior to obtaining a final approval. Loan officers that obtain pre-approvals instead of prequalification typically will have quicker close times.
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