At this level, the borrower has spoken with a Mortgage Loan Officer. They have discussed the circumstances of the borrower in detail. The Loan Officer has collected information covering the 4 pillars of qualifying including income, assets, credit, and debts. The Loan Officer has taken that information and has run numbers to make sure that the borrower qualifies. The Loan Officer may have even run a credit report to confirm that there are no credit issues that may be prohibitive. If the client indicates that their credit is “Excellent” then sometimes the Loan Officer may choose not to run credit in order to avoid the “Hard pull” on the credit report. Upon feeling comfortable with the borrower’s ability to qualify, the Loan Officer will issue a “Pre-Qualification” letter that the client can present in conjunction with making an offer on a home.

Level 2 starts out like level one with a few additional requirements:

• The Loan Officer inputs the borrower’s information into a mortgage origination system.
• The Loan Officer definitely runs the borrower’s credit report
• The Loan Officer collects documents from the client to confirm that the information that has been conveyed by the client is accurate according to mortgage banking standards
• Upon completion of the application and confirmation that the information provided is accurate, the Loan Officer runs the client through one of several automated underwriting systems to confirm that the loan application is acceptable for approval according to conventional, FHA, VA or USDA standards. Once confirmation is achieved by the system, then the loan office issues a pre-approval letter to the client that can be used when the client is presenting an offer.

Level 3 involves taking an eligible loan application after completion of level 2 and submitting it to an underwriter for what is commonly known as an “Approval Subject to Contract”. This extra protection is something that is commonly reserved by the industry for borderline cases, however, it is usually available upon request from the client and can escalate the value of an offer in the eyes of a seller. If the seller knows that the potential buyer of a home has already gone through the scrutiny of underwriting, they may look at the financing as near-guaranteed and it may help illuminate the offer as being closer to a cash offer than any other offer with mortgage contingencies attached.

The important thing with any pre-approval is to make sure that you are completely honest with the Mortgage Loan Officer and that ANY and ALL pertinent information be disclosed upfront. Many reports are run as part of the approval process, and items not disclosed upfront will more than likely show up during the process, at which point it is too late to fix them.

The best way to look at qualifying is to look at your Loan Officer as your attorney and the underwriter as the Judge. The Loan Officer’s job is to take your information and try to navigate it through the guidelines and requirements of the mortgage banking industry just like an attorney would try to navigate his client’s rights and case through the legal process. In both cases, it is their job and their duty to try to get the best result for their client within the guidelines they have to work. Being honest with your Loan Officer is your best shot at navigating your application to approval.