Lenders write Preapproval letters for buyers. If you are planning to purchase a property with a loan you will need a preapproval letter to include with your offer. The preapproval letter is proof to the seller that you have the financial capacity to qualify for a loan to buy their property.
The preapproval letter is a 1-page document. It usually takes four to five days to get pre-approved. The lender will want a filled out loan application w/ social security numbers, driver license numbers, past two years of tax returns, W-2 forms, pay stubs, and credit report- a whole bunch of other documents that they request. Sometimes it can take a couple days just to dig all this information up. Lenders verify borrowers’ credit, income, employment and other assets. The faster you get the lender your documents, the quicker you will get preapproved.
My advice to buyers is to get your preapproval letter as soon as possible – that way if you find a property you like you will be ready to write an offer. It should be noted that it is possible to get an offer accepted without a preapproval letter (I have done it before), but it is very hard. If the property has multiple offers, forget it, the seller will put all the offers without preapproval letters and proof of funds in the trash.
A great thing about getting preapproved for you as a buyer is that you will be able to talk with the lender. Your lender will be able to tell you how much you can afford, so you will know your maximum purchase price, and what your monthly payments will be. Sometimes it is better to spend less than the maximum price- I always say a 30 year fixed loan is 360 payments so make sure you are comfortable and not stretching too thin. For first time home buyers, you often have to stretch to buy your first property- so if you are stretching be willing to “rough it” for a few years as this sometimes just comes with the territory of buying your first home.
When you are talking with your lender, ask about interest rates, rate locks, closing costs, and different loan programs (FHA loans, VA Loans, interest only, 30 year fixed, 15 year fixed, Point loans, No Point loans), Private Mortgage Insurance.
With your preapproval letter in hand, you are ready to write offers!