Importance of a Obtaining a Pre-Approval Letter When Buying A Home

What is a pre-approval letter?
As the first and foremost step in the home buying process, this letter shows that the buyer has been pre-approved by a lender to buy his home for a specific loan amount.

You'll know how much money you can qualify to borrow. Most home buyers have a rough idea of how much they would feel comfortable paying every month on their mortgage. However, there's no quick-and-dirty way to translate that monthly payment into a specific maximum mortgage amount because other factors -- down payment percentage, mortgage insurance, property taxes, adjustable interest rates and so on -- are part of the calculation. And, you might not be qualified to borrow as much as you think, depending on your income, your debts and your credit history.

For homebuyers, the main importance of obtaining a loan pre-approval upfront saves a ton of time and crushed dreams. You don’t want to take your partner out looking at his or her idea of a dream home only to have to downgrade the dream from a million dollar waterfront estate to a one-bedroom condo without a view. Without the pre-approval letter, there is no point in looking for homes. It is similar to shopping without your wallet. You might find something that appeals to you, but there won’t be any way to fund that purchase. 

Additionally, some homes, such as condominiums, townhomes or distressed properties, may not qualify for certain loan products.  You’ll want to know up front which loan products you qualify for.

You'll have more leverage in negotiations with the seller. Sellers often prefer to negotiate with pre-approved buyers because the sellers know such buyers are financially qualified to obtain the financing they need to close the transaction. When sellers see that a potential home buyer has a pre-approval letter, they will be more inclined to accept the buyer’s offer. The sellers will know that the buyer isn’t just submitting a “blind” offer, prior to getting pre-approved for a mortgage loan.

The best homes at the best prices always sell quickly and may receive several offers within hours of going on the market. Even if you have managed to get in to see a home without contacting a lender, the seller may not consider your offer until you have been pre-approved. A pre-approval letter is an especially favorable negotiating point in a competitive multiple offer situation. Additionally, you’ll feel more confident about making a strong offer with a pre-approval letter in hand and the knowledge that you'll be able to obtain a mortgage.

A pre-approval letter will give the seller confidence that the buyer is not only serious about purchasing, but is also financially ready, willing, and ABLE to close the deal.

Your Real Estate Agent will know you are serious about purchasing a home. A pre-approval letter signals to your real estate agent that you're a well-qualified buyer. The increased likelihood of a closed sale -- and a commission -- will naturally motivate your Agent to devote the necessary time an
d energy to you and your home purchase.

Read More about 4 Common Home Buying Mistakes.

Reina Bauer
[email protected]
Supreme Lending
1000 Mansell Exchange W
Suite 270
Alpharetta, GA 30022
Direct: 770-855-4974
James Perfilio
[email protected]
Supreme Lending
1000 Mansell Exchange W
Suite 270
Alpharetta, GA 30022
Direct: 353-251-6441
Rodney Mason
[email protected]
Prospect Mortgage

825 Juniper St NE
Atlanta, GA  30308
Office: (404) 591-2453
Direct: (404) 591-2453