Why do top real estate agents ask for a home loan pre-approval letter before showing houses to prospective buyers? There are several reasons why. First, buyers who have secured pre-approval for home loan have distinct advantage over those who don’t have one. Securing this precious document strengthens their negotiation ability since buyers with mortgage pre-approval have already proven their ability to obtain financing.
In addition, a mortgage pre-approval provides a specific purchase price buyers qualify for. This prevents prospective home buyers from wasting their time and experiencing disappointments as a result of not being able to afford the house they want.
Why Should You Get a Home Pre-Approval Letter Before House Hunting?
A pre-approval letter assures the seller that you are a serious buyer. Unlike being pre-qualified which merely means that you have been initially screened by a lender, securing a home loan pre-approval letter provides a guarantee that after processing and verifying your current credit history, income, assets and liabilities, the lender has found no issues and will be funding your loan in the next 60 days.
The same document also inspires your real estate agent to work harder to help you in your house hunting efforts since he or she knows that you will be buying a house once you find what you’re looking for.
Obtaining a pre-approval for a home loan also helps speed up the closing process. Pre-approved buyers close quicker than pre-qualified buyers since most of the background checking has been completed even before an accepted offer on the property has been obtained.
However, please understand that the issuance of a home loan pre-approval letter is not a guarantee that the funds will be released. There are certain conditions that must be met before the process can be completed. Specifically, you need to:
- Find a property and have a satisfactory appraisal done. The property must be worth what the buyer and seller agreed to and that there are no bank-required repairs.
- Exhibit continued creditworthiness.
- Provide proof of an acceptable home inspection.
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