With fewer homes on the market, do we have a better chance to get an offer accepted if we have a pre-approval letter?
While a preapproval letter is not necessary to put in an offer on a property, it definitely strengthens your offer and helps it stand out in a multi-offer scenario. An offer, when accompanied by a preapproval letter, lets the seller know that you are serious about purchasing their property and have taken the steps necessary to have a lender willing to back your purchase. Nowadays, many realtors and real estate agents will not show homes to a potential buyer without a preapproval letter, so be prepared to have this when you’re ready to search for your next home.
Is a preapproval letter the same as being prequalified for a loan?
Actually no, a preapproval letter and being prequalified for a loan are not the same thing. Prequalification is a great method to use when you are shopping for a mortgage company, as you only have to answer a few questions and it’s a quick and easy process. It’s a great way to narrow down potential lenders. But obtaining a preapproval letter is a much more extensive qualification process and is the strongest sign a buyer can give a seller that their finances are secure enough to go through with the financing of their property.
Will it hurt my credit score to apply for a preapproval letter?
It does show up as a hard inquiry on your credit report, which may allow a dip of a few points to your score, but should rebound quickly within a couple of months.
How long is a preapproval letter good for?
A preapproval letter is valid for up to 3 months, so you shouldn’t apply for one until you’re ready to do some serious house shopping.
How do I obtain a preapproval letter?
Once you are ready for a preapproval letter and know which lender you want to use, you will need your photo ID, social security number, proof of income by pay stubs or tax returns, monthly expenses, and proof of any other cash or investments to submit to the lending company.