There are two parts to the mortgage preapproval process: approval of the borrower and approval of the property. Preapproval means the borrower can take up to a certain amount of money, usually within a certain period of time. Preapproval is also contingent upon the borrower finding an acceptable property, one with a satisfactory appraisal as well as a title report showing that the seller is able to convey clear title of the home to the buyer.

There are several benefits associated with getting preapproval. Potential homebuyers will know precisely how much they can afford to pay, and they will be in a better position to negotiate with a home seller.

It is important to recognize the difference between a prequalification letter and one granting preapproval, however. The former, which carries less weight than preapproval, simply states that the lender will grant a loan of a certain amount pending verification of the financial data provided by the borrower and approval by an underwriter. Also, prospective borrowers should understand that their mortgage broker is not a lender. Brokers are middlemen who broker loans to lenders. Seasoned brokers may be willing and able, however, to write a preapproval letter without getting lender underwriter approval. However, borrowers who have blemished credit or any unusual financial circumstances should verify that their mortgage broker has an underwriter review a package before issuing a preapproval letter.

"How Should I Get Preapproved for a Mortgage?," Orlando Sentinel (10/08/00) P. J26; Hymer, Dian.

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