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Phase 1: Pre-Qualification Journey

What is Pre-Qualification?

Pre-qualification is a fast, preliminary assessment where borrowers answer basic questions to:

  • See if they likely qualify for a loan
  • Get estimated loan amounts and interest rates
  • Avoid wasting time on a full application if they won't qualify

Credit Impact: Soft credit pull only (does NOT affect credit score)

Pre-Qualification Step-by-Step

Pre-Qualification Steps Explained

Step 1: Consent

What Borrower Does: Agrees to terms and credit check
Why It Matters: Legal requirement before pulling credit

Step 2: Property Type

What Borrower Does: Selects building type (single family, condo, townhouse, multi-unit, manufactured)
Why It Matters: Some property types aren't eligible
Common Issues: 5+ unit buildings not allowed (commercial property)

Step 3: Number of Units (If Multi-Unit)

What Borrower Does: Selects 2, 3, or 4 units
Why It Matters: Platform only handles residential properties (1-4 units)
Skip If: Not a multi-unit property

Step 4: Loan Purpose

What Borrower Does: Selects purchase, refinance, or cash-out refinance
Why It Matters: Determines loan structure and requirements

Step 5: Contact Information

What Borrower Does: Provides name, email, phone, last 4 digits of SSN
System Action: Creates account and starts secure session
Important: This is when the borrower account is created

Step 6: Property Address

What Borrower Does: Enters property address and selects usage (primary residence, second home, investment)
System Checks:

  • Is property in a state where we're licensed?
  • Property value estimation (automated)
    Common Issues: Unlicensed states result in immediate denial

Steps 7-8: Property Status Questions

What Borrower Does: Answers yes/no questions:

  • Has property been listed for sale in last 6 months?
  • Was property recently purchased or refinanced?

Why It Matters:

  • Listed for sale: Indicates short-term ownership intent (not eligible)
  • Recent purchase/refi: Non-primary residences need 6-month "seasoning" period

Step 9: Credit Event Questions

What Borrower Does: Declares any recent:

  • Bankruptcy filings
  • Foreclosures
  • Loan modifications

Why It Matters: Pre-screens before pulling credit to save time

Step 10: Credit Check ⭐ MAJOR CHECKPOINT

What Borrower Does: Provides:

  • Full Social Security Number
  • Date of birth
  • Employment type and income
  • Current employer

System Actions:

  • Pulls soft credit report (no score impact)
  • Calculates credit score
  • Reviews credit history
  • Runs automated underwriting rules

Common Denial Reasons:

  • Credit score too low (most common)
  • Recent bankruptcy (within 4 years)
  • Recent foreclosure
  • Enrolled in credit counseling
  • Too many late payments

What Happens Next:

  • Approved: Continue to next step
  • Denied: See reason why, application ends
  • Adverse Action: 60-second countdown explaining reason, then application ends

Step 11: Co-Borrower (Optional)

What Borrower Does: Decides whether to add co-borrower (spouse, partner)
If Yes: Co-borrower provides same information as primary borrower
System Actions:

  • Pulls co-borrower credit
  • Uses LOWER credit score of the two borrowers
  • Combines incomes for qualification

Skip If: Applying individually

Step 12: Mortgage Selection

What Borrower Does: Reviews existing mortgages from credit report, selects which to pay off
System Checks:

  • Can't pay off more than 2 liens
  • Property valuation recent enough?
  • Mortgage information valid?

Common Issues: Too many existing liens (3+)

Step 13: Debt Selection

What Borrower Does: Reviews other debts (credit cards, auto loans, etc.), selects which to consolidate

System Calculates: Debt-to-Income Ratio (DTI)

DTI = (All Monthly Debt Payments) / (Monthly Gross Income) × 100

Important Rule: DTI must be 50% or less
If Over 50%: Borrower must go back and select fewer debts to pay off

Example:

  • Monthly Income: $6,000
  • Current Debts: $2,500/month
  • New Loan Payment: $800/month
  • Total: $3,300 / $6,000 = 55% DTI ❌ Too High
  • Solution: Reduce debts selected until DTI ≤ 50%

Step 14: Loan Offers ⭐ FINAL STEP

What Borrower Does:

  • Reviews loan amount, interest rate, monthly payment
  • Selects origination fee option (discount points)
  • Accepts an offer

System Shows:

  • Multiple rate/fee combinations
  • Estimated monthly payment
  • Total loan amount
  • APR (Annual Percentage Rate)

Final Validation: System runs complete check of all information

Outcomes:

  • Approved: Borrower sees "Congratulations!" and button to start full application
  • Denied: Sees explanation of why offer can't be made

Pre-Qualification Exit Points

Borrowers can exit at many points:

  1. State Not Available: Property in unlicensed state → Can request Loan Officer contact
  2. Property Listed for Sale: Listed in last 6 months → Must wait until delisted
  3. Recent Purchase Without Seasoning: Non-primary residence purchased <6 months ago → Must wait
  4. Credit Event Declared: Recent bankruptcy/foreclosure stated → Doesn't qualify yet
  5. Credit Score Too Low: Below minimum (typically 640) → Most common denial
  6. Credit Counseling Enrollment: Enrolled in debt management → Must complete program first
  7. Recent Bankruptcy: Within 4 years → Must wait until 4 years pass
  8. Recent Foreclosure: On credit report → Must wait 4-7 years
  9. Too Many Liens: 3+ liens to pay off → Can't proceed
  10. DTI Too High: Over 50% and can't reduce → Must increase income or reduce debts
  11. Final Validation Failure: Offer rules failed → Various reasons

Success vs. Failure Rates

Typical Completion Rates:

  • Start to completion: 60-70% (30-40% drop off or denied)
  • Reach credit check: 80% of starters
  • Pass credit check: 70-75% of those who reach it
  • Accept offer: 85-90% of those approved

Most Common Drop-Off Points:

  1. Credit check (30% of failures)
  2. Contact info / property address (20% abandon)
  3. DTI calculation (15% can't get under 50%)
  4. Coborrower credit check (10%)
  5. Other knockout points (25%)