Pre-Qualification and Pre-Approval Letters
Before you make an offer…
A pre-qualification is a quickly derived opinion from a lender of the maximum amount of real estate you can qualify for. It often is written in a letter form. Less information is required for a pre-qualification.
A pre-approval is a more in-depth process. It tells how exactly how much real estate you can afford. When placing an offer on a property it is assumed that at the very least you will have a pre-qualification letter, however, it is not nearly as beneficial as having a pre-approval letter. In a competitive seller’s market, an offer from a buyer with a pre-qualification letter could lose out to a person who has a pre-approval letter. Therefore it is also a good idea to have the letter in an electronic form to make for fast and efficient accompaniment with an offer.
Also, being pre-approved is more efficient; it reduces the amount of time it will take your lender to fund your loan. When applying for pre-approval, be prepared to provide comprehensive documentation, which the lender may independently verify, including but not limited to:
- Job and career status
- Monthly debt payments
- Cash available
- Total assets and debts
NOTE: At the very least you will have to provide a pre-qualification letter to make an offer on a property.
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