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The Pre-approval

If you are looking to buy a home soon, or have recently put your house on the market, you have probably heard about the infamous “pre-approval letter” and something tells you its pretty important. I get asked fairly often why buyers need to be pre-approved before they are shown homes. The long and the short of it is that it proves the buyer is ready and able to purchase.

When a buyer is pre-approved, s/he goes through a process that involves looking at his/her financials to ensure that, should a contract be agreed upon, the buyer would be able to fulfill the commitments in the contract.

While the pre-approval process is not super long or arduous, it is thorough. The buyer’s pre-approval will be based on income, credit score, employment verification, and other factors. The lender will check to makes sure that information provided to them on the loan application is correct, providing an additional level of authenticity. When all the verification is completed, the lender will give the buyer a pre-approval amount, which is how much the lender will be willing to loan the buyer for a mortgage.

This pre-approval amount is instrumental in helping to guide the buyer’s home search. The buyer will know before beginning the house hunting process how much s/he is approved for, which will narrow the search. Then, when it is time to write a contract, both the buyer and the seller will rest easy knowing that, unless something comes up (job loss, etc.) before closing, the loan will be approved, and the contract can go to closing.

If you are a seller, you will want to ensure that any offers you receive are accompanied by a pre-approval letter. Without a pre-approval, you can’t know for sure that the person offering to purchase your home would actually be able to complete the transaction.

Most buyers’ agents won’t take prospective purchasers out to look at homes without knowing that they have been pre-approved. In most instances, it is a waste of time for all parties. How can you know what you are looking for if you don’t know how much money you can spend?

If you are just starting the process and don’t know which lender to talk to about getting approved, just ask me! I can provide you with a list of LOCAL reputable lenders I have worked with in the past and you can choose the one that can provide you with the best rates and that you feel most comfortable with.