When we receive calls from potential buyers saying they want to buy a home or sell their home and buy another, we must always ask if they have talked to a lender. Before we set up an online search, get in the car to look at properties and make offers the first step is to have the lending aspect of buying a house in order. (Unless it is a cash deal, in which case we can get in the car and go look at houses!) In offers involving financing we attach a letter from the lender supporting the Buyer’s ability to get a loan.
People tend to use the terms pre-qualification or pre-approval letter interchangeably. There is actually a big difference. With a prequalification, the lender is performing a few checks on the prospective borrower’s finances to determine the amount they may qualify for. It also states that the borrower is qualified pending further examination of their financial situation.
For a preapproval, however, the mortgage lender examines and verifies the client’s debt, income, savings, assets and credit report. The information must satisfy the lender’s underwriters that this client is a low risk and a good prospect for repaying the loan. Preapproval is a more vigorous vetting and a lengthier process than prequalification. A preapproval indicates that all there is left to do is attach a property to the loan.
Clients who can show a preapproval letter to a seller are more likely to be seen as serious, potential buyers who can qualify for the loan and follow through on their bid. With multiple offers as common as they are these days a preapproval letter can make a difference.
We have a list of lenders to recommend if you do not have a professional lender.
There is a lot more to the offer process in which we help guide you through every step. The first step, however, is to talk with a lender and get your financing options lined up. Please don’t hesitate to contact us with any questions, we look forward to hearing from you!