At least once a week I’ll get a call from someone that wants to see a house and I’ll ask if they are working with a lender. Typically the answer is “No I want to find the right home before I worry about getting a loan.” I’ll explain to them that there is a process and starting at step 2 is the incorrect approach the home buying strategy.
The Preapproval Letter – The Golden Ticket
Step 1 is getting preapproved. Step 2 is the home search. I coach my clients on picking the right local lender and that’s for another blog but for time sake let’s assume you’ve got a lender. You will fill out an application and once you are preapproved they will email you a preapproval letter. Simply stated, a preapproval requires verification of your income, credit, assets and liabilities.
Having this letter gives you so many advantages over the other buyers you are competing with. Without it, in the eyes of the seller you are just a home buyer that’s making an offer and negotiating the price of their home with no evidence of where the funding is coming from. It puts you in a stronger position to have your preapproval letter.
A Buyer Has To Know Their Limitations
Once you go through the preapproval process with your lender they will let you know your price range. Now you know and can begin searching! You can now focus on homes within your range without having to guess.
Sellers = Jerry McGuire
You’ve found your dream home and now you want to make an offer, how exciting! But it’s a Friday and you won’t be able to get preapproved until Monday and that’s if your lender has the time to do it. By the next day the for sale sign now reads “Under Contract” and your home is now someone else’s dream home.
Remember Jerry McGuire? Imagine the seller saying “show me the money” and they have the right to do it. It hurts to see so many buyers that are not prepared and have that perfect home in the neighborhood they wanted just go under contract for another buyer and learn a lesson the hard way. Have your letter and have it ready.
Real Estate Agents Need It Too
A lot of first time buyers just don’t realize you’ll more than likely need the preapproval letter to submit with an offer. When an offer is written, we are giving your terms to the seller. The preapproval letter is sent along with the offer and the listing agent will present it to their client. Trust me they will look it over with a fine tooth comb and can also call me to ask any questions their seller may have.
So, can you submit an offer without the preapproval letter? Yes, but if you are going up against multiple offers then guess who will win? The buyer that’s taken the extra step to prove that their finances are suitable to buy the home gets the prize. To a seller, the preapproval letter is proof that you are a serious, less risky buyer since you have been checked out by your mortgage lender.
If you’d like to see the entire loan process check out this link: Loan Process