Pre-Approval Letter – Essential To Purchase A Home
In today’s purchase market, the Pre-Approval process and what we call having The Letter is important in how it relates to you, the prospective home buyer. This process helps you prevent the swing and miss at buying the home of your dreams.
A Pre-Approval Letter simply states your qualifications as a prospective borrower in terms of how much you can afford on a home. It is important to understand that in this marketplace is it impossible to get an offer accepted without having The Letter.
For example, let’s assume that your Relator will attempt to present an offer without The Letter. The offer then goes to the Listing Agent (the seller’s Realtor). The Listing Agent will not present the offer to the seller unless they have a sound understanding of your qualifications as a borrower. They need to see The Letter. So even if you get passed the first gate keeper, you have no chance of getting past the seller’s Realtor.
Prospective buyers typically fall into 1 of 2 buckets:
Buyer #1 says to their realtor “Don’t worry about an approval letter. I have excellent credit, high income and great assets, I have no concerns about qualifying. I will get you a letter when I’m ready to present.”
Buyer #2 says to their realtor “I’d like to speak with a mortgage professional to determine my qualifications.”
Buyer #2 takes the time to provide bank statements, W2’s, and pay stubs to the Lender in advance of making an offer. They then know the price range they qualify for and know all of their loan options. They are prepared for the monthly payment and also the cash required for closing. The Realtor is now prepared and understands how to write the offer, taking into consideration their down payment and any seller concessions that may be needed. The most important part of this is that they are prepared to make quick decisions during the negotiation process.
Now, assume the desired home for both buyer #1 and buyer #2 hits the market at 5:00pm Friday evening.
Prospective Buyer #1 now has to find their Lender in a hurry. They have to hope their lender is available late Friday night or early Saturday morning. They also have to gather their bank statements, W2’s, and paystubs and have their credit run before obtaining The Letter.
Prospective Buyer #2 has it easy as they have The Letter and their offer can be presented immediately. They will beat buyer #1 to the table every time. They suffer no anxiety or frustration, and get to focus solely on the negotiation instead of digging up paperwork.
Moral of the story is it is always better to have The Letter and not need it than need The Letter and not have it.
We here at First Commerce Financial can help you obtain pre-approval letters on short notice and are available on nights and weekends as well.