Why You Need A Pre-Approval Letter

In today’s marketplace, you need a pre-approval* letter. Not a prequalification letter…

While they sound somewhat the same, they really mean two different things entirely and if you have the wrong letter in your hand, the sellers may decline your offer and accept another.

Prequalification is your very first step when embarking on a home-buying campaign. It is the result of a conversation you have with an experienced loan officer.

The loan officer will ask you a few questions and it really doesn’t take very long.

A loan officer will ask about your current employment such as the nature of your job, how long you’ve worked there, and the amount of gross monthly income you make.

You’ll also be asked about any monthly payments you’re required to make each month to different creditors such as a credit card or car payment. Payments such as your phone bill or utility bill each month aren’t counted.

Your mortgage lender will then take this information, factor in current market rates, and calculate your qualifying mortgage payment. From this, the loan officer will then provide you with an approximate loan amount based on the hypothetical payment.

If you’d like, your loan officer can provide you with a prequalification letter based on your conversation. However, sellers, as well as real estate agents, know that a prequalification letter isn’t verified. It’s just a conversation. Even though the information you provided the loan officer was accurate, it needs to be verified by third-party sources.

Getting Pre-Approved For A Mortgage

Going through the mortgage pre-approval process helps prevent last-minute issues from arising throughout the loan process. A pre-approval puts you and the seller at ease knowing you are financially capable of following through with the purchase of the home.

A pre-approval letter is issued after your loan officer reviews copies of your paycheck stubs and W2 forms from the last two years. Your credit report and credit scores will also be reviewed. To make sure there are enough funds to close, your loan officer will request bank statements.

Your pre-approval letter will state that you have applied for a home loan, your income, assets, and credit have been reviewed and essentially all you need is a property address.

When a seller sees two offers on the table, the one with a pre-approval letter attached will likely get the nod. Even if the offer is slightly lower than the one with just a prequalification letter.

Remember, sellers typically buy another home when they sell theirs. If their sale falls through, so does their purchase.

With an Ideal Lending pre-approval letter in hand, you have the first step in financing your home out of the way, allowing you to focus on finding the perfect home.

*A pre-approval does not constitute a loan commitment or guarantee of a loan. Pre-approval is subject to a satisfactory appraisal, satisfactory title search, and no meaningful change to borrower’s financial condition.


Buying a new home or refinancing your current loan? Our experienced team of loan originators are dedicated to making that a reality. At Ideal Lending, you will work one-on-one with a dedicated mortgage loan officer who can explain loan programs and offer great mortgage rates to meet your financial goals. Contact us today!

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