Pre-qualifications vs. Pre-approvals
One of the issues with all of the online pre-qualification tools as well as with “pre-qualifications” in general (like what banks perform) is that they do not account for job history.
With a “pre-qualification,” either software or a loan officer does a preliminary analysis based on credit, income, assets and loan amount.
With a full pre-approval, a loan officer or underwriter combs through the complete file looking for every potential issue.
We have had two unqualified borrowers come to us in the last week alone who were “pre-qualified” at other lenders.
Six Months and Two Years
In both cases, the borrowers had insufficient job history to qualify, an issue that the loan officers and pre-qualification software missed.
One of the borrowers had been getting paid “under the table” for many years, for example, and only started getting paid “above the table” two months ago b/c she decided to buy a home.
She needs to be on her new “above the table” job for a full six months, however, before she will qualify for FHA financing (FHA borrowers need to be back at work for a full six months after a long “job gap”).
Similarly, borrowers who receive a large portion of their income in commissions or bonuses need two years of history before we can use the commission or bonus income to qualify them for a mortgage.
Two Points To This Blog:
1. Beware of mere “pre-qualifications,” as they are often worthless.
2. Beware of job history requirements, as just having a job is often not enough.
Founder/Broker | JVM Lending
(925) 855-4491 | DRE# 01524255, NMLS# 335646