IS A MORTGAGE PRE-APPROVAL LETTER NECESSARY TO MAKE AN OFFER ON A HOME?
The short answer is no. However, if you want your offer to be taken seriously and to stand out from any competing bids, that little piece of paper can really give you the edge!
WHAT IS MORTGAGE PRE-APPROVAL?
Basically, a mortgage pre-approval letter is a guarantee from a lender that it's willing to finance your home purchase up to a certain dollar amount, based on the financial information you have provided to the said lender, i.e., pay stubs, bank statements and tax returns to name a few. This is not to be confused with pre-qualification. These two terms are often used interchangeably, but there is a major difference. A pre-qualification is provided based on VERBAL information shared with your lender (income, credit, debt and asset information) and has not been verified with substantial and verifiable documentation. A pre-approval requires an underwriter to thoroughly review your documentation and approve the income and assets for a loan. If you must get a mortgage pre-approval letter, make sure you get the best one possible.
WHAT IS A PRE-QUALIFICATION LETTER?
It is a letter based on consumer submitted data, either by completing an online loan application or providing information verbally over the phone. This letter provides a ballpark of what you MAY be approved for. It does not include an analysis of your credit report or an in-depth look at your ability to purchase a home. It’s based solely on the information you hand over to the lender, so it doesn’t mean much at all if you don’t provide accurate data.
CAN I USE A PRE-QUALIFICATION LETTER INSTEAD?
Well........yes.....but, don't you want to have the best possible chance for your offer to be seen by the seller given the current crazy market we are in with limited inventory?
In the end, either letter will provide you a max price range you can potentially qualify for. Keep in mind that you don’t have to shop at the top of your price range. Depending on the market, you might be able to get into a perfect home for less money than you’re approved for, leaving you with extra cash each month to set aside for retirement, the kids’ college funds, or checking something off your bucket list.
Call me today to assist you in qualifying to purchase your next, first, or last home!
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