Money Matters: Mortgage pre-approvals disappearing

Reported by: Brittany Price
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Updated: 1/16/2014 10:04 am
For years, mortgage pre-approvals were a crucial step in the home buying process. These written commitments give buyers a statement of the maximum size home loan they can get.
Now, pre-approvals are losing luster with lenders. 

"It's not really for the lender, it's for the buyer. It gives them a shopping list of what they can afford in terms of buying a house," James Arnold, with Lubbock National Bank, said.

Experts believe the decrease is because competition between lenders has fallen. Prior to the recession, banks used pre-approved financing to attract new clients. 

Arnold said a new trend is to provide pre-qualification rather than pre-approval. 

"A pre-qualification process looks at your debt-to-income ratio, looks at what your income is, it looks at all the debt-outstanding a potential buyer may have," Arnold said.  

That process can play into actually getting a mortgage loan. 

"They take a lot of the data you gave in the pre-qualification stage and they verify it with pay stubs, tax receipts, tax returns, those kind of things," Arnold said. 

Pre-qualifications can help buyers, but they're not promises. 

"Just because you're pre-qualified doesn't guarantee you're going to get a mortgage," Arnold said.  

Unlike the more concrete pre-approval process, lenders can over-turn those pre-qualifications. 

However, Arnold said there are other steps to locking down a home loan. 

"We don't have a formal pre-qualification process, but we can help folks determine what their range of affordability is," Arnold said.  
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