Importance of the Pre-Approval Letter

Your chance at buying a dream home might be shattered if you make the mistake of waiting to contact a lender. One reason for taking this step is you will have a much stronger position with a seller with a pre-approval letter.

Why is a Pre-Approval Letter Important?

If you plan to do any house hunting it doesn't benefit you if you don't know what you can afford. You can ask many denied buyers and they'll tell you the worst feelings is finding a dream home that's outside of your budget.

Plus, in a seller's market, or with a property of great value, having your pre-approval letter gives you a bidding edge over the competition. When given two or more offers at the same time, a seller is more inclined to go with the buyer who's been pre-approved, even if it is less money. Why? The seller's goal is to close a sale the quickest way possible with the least amount of headaches. With a pre-approved buyer they know two things - one, the buyer is serious about purchasing a home, and, two, they know the buyer can afford the price they are offering.

So why wouldn't someone want a pre-approval letter?

Often times buyers are resistance in contacting lenders because of fear. Many often worry that the extra credit check will reduce their credit score. While it is true that the more people who are checking your credit can lower your score, when you are shopping for a home loan, many banks and mortgage companies take this into consideration. Another reason why people are reluctant to get a pre-approval letter is they fear the answer. They're afraid of being denied a home loan. Ironically, they can't own a home without getting a loan.

That's why many realtors recommend, or even require, a pre-approval letter before they will show homes. This protects the Realtors interest and time, but also helps you, the buyer. Because, again, one of the worst feelings is pinned your hopes on a dream home that's outside your reach. So be sure to get your pre-approval letter BEFORE you go home shopping.