When house hunting, many buyers make the mistake of waiting to contact
a lender until after they have located their dream home. As a buyer,
you will be in a much stronger position with a seller if you are
pre-approved.
Pre-Approval Letter
To effectively house hunt, you must know the amount you can borrow from
a lender. There is nothing worse than find your dream home, but failing
to qualify for the amount you need for a loan. Avoid this by asking
your lender to pull your credit information and to let you know what
needs to be done to get a pre-approval letter. If you are going to have
problems with getting a loan, it is better to know about it as early as
possible.
Sometimes buyers resist contacting lenders because it’s not the
enjoyable part of home buying and they’re afraid an extra credit check
will reduce their credit score. This resistance is penny wise and pound
foolish. Buyers who get their loan arrangements lined up at the
beginning of the house buying process are really doing themselves a
favor.
Much of the country is experiencing a hot, sellers’ market. It is not
unusual for a seller to get more than one offer on the same day. If
that happens to you, your pre-approved status can give you an edge over
the competition. In fact, it can make a seller choose you over another
bidder.
Presenting Your Letter to a Seller
When you tell the seller you want to buy their property, give them a
copy of your pre-approval letter. They will probably recognize the
value of the letter, but don’t depend on this assumption. Make sure the
seller realizes the loan is already approved.
As you give the seller the letter, explain to them that you are serious
about making the transaction go smoothly and, for that reason, you have
already been through most of the loan application process. Point out
that the lender has pulled your credit info and you’ve provided copies
of W-2s, pay stubs, and all the other things the lender needed to
decide that you do qualify for a loan. Tell the seller that the only
remaining thing to do is to give the lender a copy of the contract that
you and the seller sign, and the property needs to appraise for an
appropriate amount.
Taking this approach puts you in a very strong position. The seller
knows you are not just wishing; you are capable of buying his property.
One of a seller’s worst nightmares is signing a contract with someone,
taking his property off the market, wasting time and then finding out
that the would-be buyer cannot get a loan. On the other hand, you and
your pre-approval letter are dreams come true.
Put on your shining armor and get pre-approved by a lender. Once you
have the letter in hand, get out there and find your dream home.
