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Defining Application vs Prequalification

Answered by: 
Randy Carey
Andy Zavoina

Question: 
We would like to develop a clear set of parameters for defining an application vs a prequalification. Is a credit report considered a verification document similar to a sales contract or can we indicated that a credit report is part of our bank defined documents? For example ... we would define an application as having: name, SSN, monthly income, property address, loan amount, value of property and a credit report but if there was no credit report we would define that as a prequalification. Would you agree with this determination?
Answer: 

from Randy: "Would you agree with this determination?"

No. Defining an application has to be based on information given to you by the applicant and not whether or not the bank takes a specific action such as pulling a credit report.

Answer: 

from Andy: A key issue is what information did you obtain from the applicant, how did you respond to questions of theirs and did you make a credit decision. I'm not talking about prequal programs, but the differences when you have that person in front of you. This FRB publication can help as will the FDIC's Mortgage Loan Prequalifications: Applications or Not? booklet.

First published on 06/09/2014

Filed under: 
Lending
Filed under lending as: 
Applications
Reg. B

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