This question might seem a bit odd at first, but there can be different stages for a loan application. Typically, the difference is when someone has submitted a loan application to a lender but has yet to pick out a property. When submitting an application in order to receive a preapproval letter, there are certain things the lender will need before a preapproval can be delivered. One, you’ll need to provide written authorization for the lender to pull your credit report and retrieve credit scores. Loan programs today have minimum credit score requirements. Before any approval letter is issued, credit will need to be reviewed.
Lenders must also determine affordability. When issuing a preapproval letter, it’s typically after the borrower and the loan officer have had a conversation about monthly payments, down payments and closing costs. This prequalification is the result of a general conversation between the two regarding current credit status, employment, assets and other items. When these items are reviewed and confirmed, it’s at that point where a preapproval letter can be issued.
Borrowers can also request a Loan Estimate, formerly known as the Good Faith Estimate, which will itemize various potential costs of obtaining a home loan. Costs both from the lender and third parties. But the loan estimate isn’t considered binding until the mortgage application is considered a valid loan application according to regulations. There are six things that do turn a prequalification or preapproval into an official loan application which will then trigger a host of required disclosures the borrowers need to review, sign and return to the lender. These six items are:
• Social Security Number
• Property Address
• Estimated Value of Selected Property
• Mortgage Loan Amount South
When this information is provided to the lender, either over the phone, in person or in writing, the application becomes an official one and the lender then is required to supply an official Loan Estimate to the applicants within three business days. It is this loan estimate that will be used to compare the initial estimate with the final numbers at the settlement table. For example, lender charges cannot vary from the initial estimate to the final settlement statement. Third party charges can have an aggregate variance of 10 percent from the initial estimate. For required services where the borrowers select the provider, which is rare by the way, there is no regulation limiting changes to the final number. If any one of the required six items is missing, the loan application is not an official one and loan disclosures will not be delivered. Most often this is a property address.
It’s important to note here that just because one item is missing doesn’t mean the lender doesn’t have to provide you with an estimate of closing costs. Your loan officer certainly will upon request. But when a completed loan application withthe minimum six pieces of information are provided, things get official and various loan disclosures will be issued and the clock begins to tick.