Is Mortgage Pre-Approval Letter Necessary?
Our Atlanta mortgage lender team are often asked whether getting a pre-approval on a mortgage is necessary when putting an offer in on a home. We always advise getting your finances and paperwork in order before you start searching for a home and applying for a mortgage. Part of this is getting a pre-approval letter. While it isn't necessary, it can be beneficial and give you an advantage when it comes time to close on a home. Sellers prefer buyers who have been pre-approved because it means there is less chance of the deal falling through at the last minute.
What exactly, is a pre-approval letter?
A pre-approval letter is a document that you get from a lender that shows you are approved for a certain amount for a mortgage. In order to get pre-approved, the lender will go through your paperwork thoroughly and they will analyze your financial situation. The decision to approve you or not depends on how good your overall finances are. If they feel you are not a high risk, they will give you a pre-approval document.
What are the benefits of having a pre-approval letter?
Going to look at homes without knowing whether or not you can get the financing wastes your time and that of the real estate agent and seller. With a pre-approval letter, you know exactly how much you are able to get and can then look at homes that are within your price range. It also means that, when you find a home you like, you can act on it quicker.
Without a pre-approval letter, you have to go through the process of applying for a mortgage loan and there is no guarantee that you will get the amount you are after. This can be a problem if you have put an offer in on a home and then find you aren't able to get the amount of financing you need. This is why sellers and real estate agents prefer buyers with a pre-approval letter. It shows they are serious about buying the home and that they have had a lender review their finances. It also means there is less of a chance that an offer will fall through because the buyer didn't get approved for the financing.
How do you get a pre-approval letter?
You will need to go to a lender or mortgage broker and start the mortgage application process. This means filling out an application, which can be done over the phone, online, or in person. The lender will then run a credit check to see your credit score and history. They will look at your income and expenses as they build your financial portfolio. From these details, the lender can determine if you qualify for a mortgage loan, what type you are able to get, and how much you can afford. Once all of this is done, the lender will put in writing all of the details of what you are pre-approved for.
Tip: You may have heard of the term "pre-qualification". This isn't the same thing as getting a pre-approval though. With a pre-qualification, the lender does a basic check to see if you can get a mortgage. It doesn't hold the same weight as a pre-approval letter does.
If you have questions about getting a pre-approval letter or want to see what mortgage options are available to you, give our Atlanta mortgage lender team a call today!