Pre-qualification and Pre-approval in Foreclosure Property Loan
Effectively investing in foreclosure properties, whether in pre-foreclosure process, at an auction, or
perhaps even during the REO stage, frequently requires you to act quickly. Access to financing is crucial.
A dependable lender will help you to get fully prepared to act quickly by reviewing your financial means,
offering you advice, evaluating your potential investment opportunities, and pre-approving you for
You need to remember that pre-approval differs greatly from pre-qualification:
Pre-qualified plainly means you have discussed your financial situation to the lender, and your lender has
given a judgment about whether you will potentially qualify for a loan. Pre-qualification is simply the
lender's judgment based on information received; pre-qualification does not signal that the lender has
examined your credit report or substantiated any of the information you furnished.
Think of the process this way: A pre-qualification letter basically states, "I, the lender, believe that
this person is probably qualified for the loan of this amount if everything he claimed regarding his
financial situations is accurate." Not exactly a ringing and relieving endorsement, would you say?
While, pre-approved means you have shown documentation proving your liabilities, assets, income, and other
things the lender needs to review your financial solvency. If the lender has examined your credit report,
nearly all of the paperwork required for your loan is likely has been prepared.
A pre-approval letter basically states, "I, the lender, have examined all necessary documentation and have
performed appropriate credit checks to ascertain that this person will qualify for a loan of that amount."
All you're actually waiting for at this stage is a title and property appraisal. If you have been
pre-approved for a loan of, say, $100,000, then you should act immediately on your present foreclosure
property deals because, in principle, your lender will need only to evaluate the property value you intend
to buy to make sure the property collateral is adequate and check the title to make sure everything is in
Your lender should also take the time to provide you advice on how to increase your credit rating, increase
your net worth, and collect the needed documentation to satisfy underwriting essentials, and the lender will
even give you reasonable types of property investments based on your present financial situation and your
objectives. While it will take the lender time, a dependable lender believe time spent working with the
clients as a worthy investment that will eventually pay off as your foreclosure property investing career
takes off. Lenders seek to develop solid business relationships with productive investors, just as you seek
to establish solid business relationships with good lenders.
If you have a substantial track record proving that you have sold and bought foreclosure properties for a
sizable profit in the past, most lenders will be more willing to deal with you. If you are starting out for
the first time, and you will have zero track record; it really helps for you to show your lender that you
know what you are doing. Look for a good foreclosure property in your neighborhood and write up a solid plan
showing the highest amount you would pay for this property, the cost to fix up the property, how long it
would need to sell, and your likely profit range. This shows your lender that you have the ability to plan
ahead, although you don't end up purchasing this particular property.