When shopping for a new home, you are likely going to be submitting an offer to the seller.  The strength of your offer can be increased by including a preapproval letter.  There are different types of preapprovals: one is credit-only and one is verified.  With a credit-only preapproval, or COPA, the lenders rely on self-reported information to offer you a quote.  They don’t typically verify your income, employment or assets.  On the other hand, a verified preapproval, or VPA, involves verifications to approve you.  Lenders verify your employment, and review asset statements and other financial documentation, like paystubs and tax returns.

When you’re ready to make an offer on a house, a VPA tells the seller that you’re an approved buyer who can afford to buy their home, giving you an edge over non-approved borrowers.

What is a credit-only preapproval?

A credit-only preapproval, or COPA, takes your stated income and assets and operates under the assumption that those are accurate.  The lender will then do a hard inquiry on your credit and submit that credit package, along with your application, through an automated underwriting system that analyzes many factors, such as the purpose of the loan, the debt-to-income and loan-to-value ratios, and overall credit of the borrower(s).  Once this is complete, we receive findings that let us know, based on the information that was provided, that you are approved for financing.  We can then issue a preapproval letter to submit with your offers on homes.

What is a verified pre-approval?

A verified pre-approval, or VPA, follows all of the steps listed above, but goes one step further by collecting documentation that supports the stated income and assets and puts that information in front of an underwriter for review.  This is similar to the actual underwriting process, but in advance of actually having a specific property that you are being underwritten on.  The types of documents reviewed would be bank statements, paystubs, tax returns, and W2’s.  VPAs look better to sellers, as it requires the lenders to verify your financial information and approve you – the buyer – for a mortgage.  Plus, it will pinpoint your home-buying budget.

How long does a COPA or a VPA take?

A COPA is typically a quick process after the application has been completed, usually just a matter of a few hours.  A VPA takes longer, sometimes as long as 7 to 10 business days, in order for the underwriter to make sure that everything is accurate.

When is the best time to get pre-approved?

The best time to get pre-approved is as early as possible.  It shows that you’re a serious buyer and are financially capable of closing on a home, providing confidence to sellers.  Even if you aren’t planning on buying in the very near future, it’s still a good idea to get pre-approved.  A pre-approval is typically good for about 60 days, and you can get it refreshed after that window expires.