Ten Ways to Win: #3 – What is a Pre-Approval Letter? (And I thought I had one!)
We live and work in a “one shot” housing market. What does this mean? It means that, as a Buyer, you have “one shot” to get the Seller’s attention and to move your offer to the top of the competitive bid pile. Critical to your chances in this market is assuring the Seller that you have completed your mortgage due diligence and that you are qualified to buy a home. This assurance is in the form of a “Pre-Approval” letter provided to you by your bank or lending institution. This letter accompanies your offer to be presented to the homeowner and is key to their choice of a buyer for their home.
This letter begins with an on-line application, says Jeff Lichtenstein, a Senior Loan Officer with Ruoff Mortgage in Columbus. In that on-line application the borrower will be asked where they work, how long they have been in their job/s, salary, debts and permission to run a credit report. “When filled out completely,” says Jeff, “I can have a Pre-Approval letter in ten to 30 minutes.” Optimally, that letter should have the address of the home to be purchased, the qualifying amount, the down payment and the type of loan (FHA/VA/Conventional) for which you are approved.
When do you get this letter? Before you walk into that “must have” kitchen. Many times, “dream homes” are found on weekends and scrambling to get a letter on a Sunday afternoon is a challenge.
What else can you do? While the loan officer cannot put additional information into the Pre-Approval letter, they can, with your permission, brag on you in a cover email. Ask your loan officer to add a “cover” email to your letter stating your credit score, your verification of down payment funds, and the security and/or longevity of your job. All of these extras can give you a competitive edge. This is especially important if you are an FHA or VA Buyer in a market where the conventional borrower has the competitive edge (see Ways to Win #1).
Next, get ready to jump through hoops: any and all and instantly when asked. “Most delays,” says Lichtenstein “are because the Borrower doesn’t provide us the documentation we ask for.” It’s important to understand that these requests for documentation are not suggestions or “it would be nice if…”. Your loan officer is working under strict federal guidelines with no room for compromise or workarounds. Lichtenstein, a 33-year veteran of the mortgage industry, has plenty of tales of borrowers who believe delay in providing the documentation will result in “forgetting” the need for it by their loan officer. Not going to happen, says Lichtenstein. “I don’t get the documentation; you don’t get the house.”
Another important suggestion: be honest from Day #1. If you had a car repossessed five years ago: put it on the table now. Secret bank account? There are no secrets when you are applying for a mortgage. (In fact, this is the time to make sure your spouse or significant other knows your financial dirty laundry — it’s all going to come out!) If your loan officer is given negative information up front a solution can be created or save wasted effort by stopping the process and help you “rehab” your credit.
This blog is written by Kathy Chiero. Kathy is the Team Lead for The Kathy Chiero Group of Keller Williams Greater Columbus Realtors. Thinking of Buying or Selling? Find us www.OurOhioHome.com © 2021 All rights reserved.