Home sellers often request a mortgage pre-approval letter from prospective buyers before considering an offer on their home. The letter shows the seller that you are a serious buyer who is able to secure financing for your purchase and helps give you bargaining power.
Getting pre-approved for a mortgage doesn’t guarantee you can get a loan, but it does provide you with a realistic estimate of your home buying budget. This can help you shop for homes with confidence, and it can also avoid any interruptions to your home buying process if you need to change your purchase price after your pre-approval is finalized.
Requirements of a Pre-Approval for a Mortgage
The pre-approval process requires the buyer to complete a mortgage application and provide proof of assets, income, credit history, employment verification, and other important documentation. The lender then will send a pre-approval letter that lasts for 60 to 90 days, depending on the lender.
When you are pre-approved, the lender will have verified your income, assets, and debts to the maximum amount they are willing to lend you based on key criteria. The loan amount you are approved for will vary by home price, down payment, loan term, property taxes, homeowners insurance, and interest rate on the loan (which is highly dependent on your credit score).
Obtaining a pre-approval letter early in the search for a home is most helpful, since it can help spot any issues that may prevent you from getting a mortgage later. It can also give you more time to save for a down payment and closing costs.
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