What Role Does a Prequalification Letter Play When Buying a New Home?
While some might wonder how important a prequalification letter is, sellers’ ask for this letter by mistake. It’s true, a prequalification letter is not concrete approval but it at least lets the seller know that a lender is willing to loan a certain amount to the respective borrower.
But what else should you know about a prequalification letter?
What is a Prequalification Letter?
A prequalification letter is a document that confirms a lender is willing to lend you up to a certain amount. This is a tentative offer based on certain stipulations and not a guaranteed offer which is why some might say the document “doesn’t really mean anything”!
However, this document is certainly the closest thing you will ever get to concrete approval. What’s more, a lender will carry out an investigation before issuing this letter which at least suggests there should be no major obstacles once other areas of a sale have been sorted.
With this in mind, a prequalification letter is always taken into account at the very least
The Role of a Prequalification Letter When Buying a New Home
If for nothing else, a prequalification letter is a document that shows the realtor or seller that you are serious about buying the home. It includes such information as the loan type or program, the loan amount and purchase price, and the expiry of the pre-approval letter.
While this prequalification letter is not guaranteed, it’s the best peace of mind for sellers and something that will certainly ensure your bid is taken seriously. It’s also a great sign of confidence from your lender and an indication that your probability of receiving a loan for the stated amount is very high.
Receiving a Prequalification Letter from Your Lender
It’s worth asking your lender questions about the process and anything along the way that they think might hinder your chances of official approval. At the same time, you can only apply and leave this decision in the hands of your lender. During this time, a lender will check your credit score and basic circumstances, and then issue a prequalification letter for 30 or 60 days. That is to say, this letter has an expiry date and every letter has a different time frame.
As part of the application process, you will also need to provide a set list of documents. You can ask your lender ahead of time for this list in order to save time on waiting for approval.
Buying a home is a process that consists of much uncertainty but a prequalification letter can remove many questions from the mind of a realtor or seller. Similarly, this is one less thing for you to worry about and when it comes to the application, you should find this letter will not only expedite the process but also improve your chances of buying the actual home. To learn more about prequalification letters or to obtain one, contact a salary-based loan officer at City Creek Mortgage today.