January 11th, 2019 8:18 AM by Jackie A. Graves, President
you need a mortgage pre-approval letter to make an offer on a house? You know
you need to get your ducks in a row before looking at homes, but does that
include securing a pre-approval letter from the bank?
The truth is,
getting pre-approved can actually improve your chances of falling
into the sellers' good graces, so you want to get it done as soon as possible
in the home-buying process.
organized do your financials need to be before you start looking? Let's
take a look, starting with clarifying what a pre-approval letter actually
What is a pre-approval
Mortgage pre-approval is
assurance from a lender to provide you with financing to buy a home up to a
certain loan amount.
“It's a letter from
your lender, written on the lender’s letterhead, stating that you are approved
for a loan of a specific dollar amount,” says Denise Shur, a
Realtor® with 1:1 Realty in San Jose, CA.
To get approved, your
lender will collect a stack of paperwork from you that will include pay stubs,
federal tax returns, W2s, investment accounts, and residential history.
Once your complete financial portfolio is analyzed, the lender will decide
whether or not to issue you a pre-approval letter.
Do you need
a pre-approval letter to see a house?
agents prefer showing homes to buyers with a pre-approval letter, because
it shows the buyer is financially capable of purchasing.
Agents "need to
know if you can really buy a home,” Shur says. That said, a pre-approval letter
isn’t mandatory to tour a home.
"All agents are
allowed to show you homes, even if you do not have a pre-approval letter,” she
adds. It just might not be in their best interest, so don't be surprised if you
get some pushback if you say you don't have pre-approval.
How a pre-approval
letter benefits you
If you don't take the
time to get pre-approval, it's not just the real estate agent's time you're
wasting—it’s possibly yours as well.
“There is no sense in
wasting your own time and that of an agent to see homes until you are ready to
purchase,” says Rosanne Nitti, a Realtor with RMN Investments &
Realty Services in Laguna Beach, CA.
Getting a pre-approval
letter should be one of your first steps in the home-buying process, she
says. “Then when you see something you like, you can act on it.”
As a buyer, that
ability to act quickly gives you an edge over people who don't have
certification from a mortgage lender.
How to get a
Serious about getting
serious? Here’s how to get started. You can work with either a loan broker, who
can connect you with the right lender, or directly with a bank, if you like the
loan program they offer.
“Some banks, like
Wells Fargo for example, may even give you a ‘priority buyer’ letter, which
puts you on a fast track to get your loan closed quickly once you find a home,”
Shur describes the
process as follows:
Fill out an
application. This can be done in person, online, or over the phone.
The lender runs a
credit check to get your FICO score.
determines your expenses and income by looking at your financial portfolio.
The bank then
determines if you qualify for a loan, and if so, what kind and for how much.
Finally, the lender
puts this in writing as the pre-approval letter.
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