When sellers are considering an offer, they won’t take their homes off the market unless the buyer is really strong. They are afraid that if the potential buyer does not qualify for the loan, they have lost precious marketing time during which another more qualified buyer would have made an offer.  Therefore, most sellers will not even consider a buyer’s offer, containing a mortgage contingency, unless the offer is accompanied by a pre-qualification or pre-approval letter.

Pre-qualification letter
This usually refers to the loan officer’s written opinion of the ability of a borrower to qualify for a home loan, after the loan officer has made inquiries about debt, income, and savings. The information provided to the loan officer may have been presented verbally or in the form of documentation, and the loan office rmay or may not have reviewed a credit report on the borrower.

Pre-approval letter
A loosely used term which is generally taken to mean that a borrower has completed a loan application and provided debt, income, and savings documentation which an underwriter has reviewed and approved. A pre-approval is usually done at a certain loan amount and making assumptions about what the interest rate will actually be at the time the loan is actually made, as well as estimates for the amount that will be paid for property taxes, insurance and others. A pre-approval applies only to the borrower. Once a property is chosen, it must also meet the underwriting guidelines of the lender, such as appraised value, etc.  

Looking at these two letters from a seller’s standpoint, you can see that the pre-approval letter carries much more weight.

Todays market requires that the buyer present his strongest possible offer, the one with the least contingencies.  If the offer does contains a mortgage contingency, and the buyer has a pre-approval letter, sellers are usually willing to take their homes off the market for the short period of time necessary to have inspections and appraisals completed.  They are less likely to take it off the market to determine if the buyer is qualified.

 What does this mean to the buyer?  To get the best price on a home he must make his offer as appealing to the seller as possible.   If a buyer is unable to make an “all cash” offer, his next best alternative is to present his offer with a pre-approval letter. 

Sellers consider a pre-qualification or pre-approval letter as a letter of recommendation.  Like all letters of recommendation it is important who the letter is from.  Generally, sellers give a letter more weight if it is from a lender that either they, or their agent, have had prior business or from ones they have heard about and feel they can trust.

If you do not have a pre-qualification or pre-approval letter, and are not currently working with a lender, give us a call.  We will give you the names of several lenders that we have worked with in the past and can recommend without hesitation.