Pre-qualifications are when you do not give any documentation to a broker or lender and they calculate your lending power off of information given over the phone or thru a website. Without verifying income, assets, credit and other important characteristics, the amount you actually qualify for may be much different. A pre-approval is granted upon review of critical documents by an underwriter or officer for the lender that is able to make lending decisions.
An independent mortgage broker works with a number of different wholesale lending partners to submit and fund mortgage loans. Because wholesale lenders generally have one location in the country and handle underwriting, closing services, funding and information technology services, an independent mortgage brokerage has limited overhead which allows for lower margins to run the business. This lower margin is what allows a mortgage brokerage to offer below market interest rates. Mortgage brokerages are not allowed to charge processing fees and other "junk"fees. Mortgage brokers are also capped at a total of 3% of total compensation and lender fees . This compensation is completely transparent to the consumer by law.
Mortgage banks and banks offer their products and therefore are not able to shop the lowest lenders available. These lenders are also not capped at 3% as their compensation is completion non-transparent to the consumer.
When you work with an independent mortgage broker, a loan estimate sent to you is binding. Fees in section A of the loan estimate may not change after being disclosed to you. Fees in section B, C and D cannot change more than a cumulative total of 10% from the initial estimate. These rules are in place so there are no surprises for you prior to closing.
In the current turbulent market, it is a great idea to take advantage of pre-locking. We have a number of lenders that allow for this. Also with the program, you do have the ability to float the rate down should the market be lower when you find a property.