Pre Approval Letter – Where Your Home Search Begins

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You just found a house that you LOVE. You call your favorite REALTOR® (wink, wink) and I ask you to forward your pre approval letter to me. OH NO! You don’t have a pre approval letter. Get one ASAP!

Most real estate agents will not show you houses until you are pre approved. I will discuss the three most important reasons for agents to require a pre approval letter (in my opinion) and I will give you my personal reason (as an agent) for following this practice.

#1 – A pre approval letter lets you know that you can get a mortgage

Not many of us have an extra $250,000 of disposable income sitting in a savings account to pay cash for a house. If you aren’t sitting on a huge nest egg, you will need to get a loan from a bank to buy a house. If you don’t qualify for a loan, you won’t be getting one. When you speak with a mortgage broker, they will take many different factors into consideration when determining if you qualify for a loan. They will look at your credit score, income, debt-to-income ratio and some other items. They can usually tell you within minutes if you are pre approved.

#2 – A pre approval letter lets you know how much money a bank will loan you to purchase a house.

There is nothing worse than finding the house of your dreams, falling in love with it, and then having your heart ripped out of your chest when you find out you can’t afford it. If you have a pre approval letter, you know your budget from the beginning. Pre approvals help by making sure you are only looking at houses that are real options to you. Your real estate agent will search for properties that meet your preferences AND fit you budget. This will save you the heartache associated with falling in love with a house that is out of your price range.

#3 – A pre approval letter lets homeowners know you can afford to buy their house.

When you find the perfect house, your real estate agent will complete A LOT of paperwork so you can submit an offer to purchase the house. The pre approval letter is an important part of that paperwork. In today’s market (March, 2016) the owner of the house you like may receive multiple offers to purchase their house. Let’s say you submit an offer on their house and do not have a pre approval letter. Then my client, who is pre approved, submits an offer with a pre approval letter. The owner knows my client can get a loan to buy their house. They don’t know if or how you could pay to purchase their house. The seller will see my client as a serious buyer. Therefore, the owner will most likely agree to sell their house (which you thought was perfect for you) to my client.

#4 – A pre approval letter lets your real estate agent work efficiently.

A real estate agent’s career is based on his/her ability to manage their workload (juggle/work for multiple clients at the same time). By requiring you to get a pre approval letter, that helps us keep the “circle of real estate” going around. We will show houses to our pre-approved clients, find their perfect house, and get an offer accepted. We are then no longer showing that client houses, it’s all paperwork and phone calls. This then allows us to add a new pre approved client to our house showing schedule and repeat the cycle. Hopefully, we will be repeating it over and over for our entire career.

If you do not know a mortgage broker, ask your REALTOR® for a referral. We know many professionals who can assist you.

Buying a house is stressful enough, don’t complicate it by trying to place an offer without a pre approval letter. It just makes life easier for everyone!

If you have real estate related questions or are interested in buying a house, contact me!

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