If you are considering going through a pre-approval process before you start searching for a home, it could be a great idea. You will want to do this in a way that allows you to avoid some of the most common problems, including being turned down by an agent or a seller, falling in love with a home you can’t afford, and becoming discouraged with the process. With a pre-approval letter, you will be less stressed about the entire situation. A mortgage pre-approval letter tells how much money you may be able to get toward a home loan. This is not a guarantee, but it does carry some weight.
Getting a Mortgage Pre-Approval Letter
To get a pre-approval letter, schedule an appointment with a mortgage company and fill out the form. You will get an official letter to confirm their findings. This can be a very quick (24-48 hours) procedure, as long as you are able to get all of the appropriate documents to the lender.
Once you have this letter, sellers and real estate professionals will be able to see that you are ready to buy and have the ability to purchase a home. It will help sellers get into a serious conversation with you about the home and negotiating a price. It can also help with the closing process.
Sometimes, it can even help you to negotiate a better deal on the home. You will be able to have an in-depth conversation without the sellers having to worry that things won’t be worth the hassle.
Even better, it can help you to weed out bad real estate agents. Most great, trustworthy real estate agents won’t work with un-approved buyers because they think it is a waste of time. It may also get you on their good side, which can help you in the long run.
You shouldn’t wait too long after getting your pre-approval, however. Banks typically only hold those rates for between 90-120 days. After that time, you might want to get an updated letter if you haven’t found a place yet.
What Will Hurt My Pre-Approval Letter?
There are a few different things that can hurt your chances to get a pre-approval letter. They include: quitting your job, losing your job, closing credit cards, opening a new credit card, getting a new loan, closing a line of credit, falling behind on payments, changing financial behavior, withdrawing a large amount of money, or concealing down-payment gifts.
Pre-Qualification Letter v. Pre-Approval Letter
It is important to note that a pre-qualification letter and a pre-approval letter aren’t the same things. You will likely need to get both to be successful in your home search.
Pre-qualification is a short procedure that gives you an idea about what kind of loan you could qualify for - it is really for your benefit and holds very little weight. A mortgage pre-approval is much more in-depth and helps you with the real estate agent and the sellers.
There are many different moving parts to getting pre-approved for a mortgage, but this will make the process just a little easier.