Just what does Preapproval mean?

Hubby and I put a contract on a house in another city. He called a local bank (AmSouth) and was preapproved for the loan amount with a decision back in an hour. Problem is this...he had two Amex accounts that went into collections - we totally dropped the ball on paying them. We paid off the two collection agencies at once, within 1 week of being notified. He got the preapp about 10 days after the CAs pulled hard inqs. However, his report is still showing clean - Amex isn't even showing late in the months prior to the collections. I don't know exactly what his scores are but they were high enough to be approved for an 80/10/10 loan, which apparently tougher to get than a regular loan setup. His ratios are also really good - something like 31% including the proposed loan amount.

What are the chances that these Amex accounts won't show up? We're not supposed to close until Jan, so there is plenty of time for his report to get messed up. The lender will pull again prior to closing, right?

Thanks.

Poochie

 

Sorry - the point I was making is that preapproval doesn't mean that we're guaranteed, right? the lender could still pull the loan if these collections show up?

 

Yes - he was "pre approved" meaning the loan officer pulled a trimerge file and did a phone app regarding assets and liabilities, then compared his stated liabilities to the debts shown on his credit report. My understanding is that the preapproval was automatic, meaning some computer somewhere liked his scores. No flags popped up, so no human had to override the computer. My understanding is that prequalifying means that the bank will give you their best guess as to what loan amount you would qualify for based on your stated income and debts, without actually pulling your score or verifying any of your information.

When I was preapproved for my last mortgage, I went through the same kind of pre-approval app, then after I got approved, a jr. officer contacted me for copies of my bank statements, paystubs, W-2s etc. I never bothered to follow up to see whether they pulled my credit the day before closing.

I'm worried sick about this. If AMEX stays gone, we're fine, as his credit is otherwise golden. But if those collections pop up....duh duh duh duuuuh (death knell). I would hate to sell our house, pack up, travel 4+ hours only to be told that we're not approved after all. This is our dream house, and is $700/month CHEAPER than what we're paying now.

Thanks all.

Poochie