Does pre-approval mean I’ll have no problem getting a home loan?

April 30, 2015 Updated: May 13, 2015

Q: I got a pre-approval letter from my bank, does that mean I’ll have no problem getting a home loan?

Alicia: That’s not necessarily the case. The pre-approval letter is a credit approval only. Basically, it’s approved based on the borrower’s credit history, income, assets, and liabilities. But it’s still subject to other factors, for example:

• The lender receives an acceptable appraisal of the subject property
• The lender does not object to encumbrances to title shown in the title commitment or survey.
• The subject property condition meets lender requirements
• The subject property is insured in accordance with lender requirements

I always recommend that my clients stay in touch with me on every offer they make, as I need to know whether the property has certain features that may be only acceptable to certain lenders but not to all lenders, so that I can match a lender that is a good fit for my clients’ offer. Things like non-permitted garage conversion, non-permitted room additions, litigation with a homeowner association, could turn the deal sour if not sent to right lender.

In summary, preliminary approval does not constitute a final loan approval but is a preliminary assessment of the borrower’s current creditworthiness. Formal or final loan approval is only granted after you have completed a loan application, and all final conditions have been met for underwriting consideration.

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Alicia Zhao is a mortgage consultant who has successfully guided over 1,000 people toward home ownership through personal mortgage planning since 2002.