Advice on Loan Approval Letters

June 2nd, 2020 by admin Leave a reply »

For every purchase offer that is made, a real estate agent is going to make sure that a loan approval letter is attached as well. This is a common practice across the United States, and one that isn’t going away anytime soon.

Why do Agents Require Loan Approval Letters?

The fact of the matter is that loan approval letters don’t have much value at all. The purpose of having one proves that the borrower has applied for a loan and is intent and serious on buying a new home.

For sellers, a buyer with a loan approval letter can reaffirm a positive impression that has been made, and can expedite the home buying process.

Loan Approval Mistakes

By making any of the mistakes listed below, you’re more or less giving the seller more ammo to turn down your offer or demand a higher one:

Submitting a Loan Approval from a Lender That Is out of Area

A listing agent will tend to feel more comfortable if they know of the lender that is approving a borrower for a loan. Things can get a bit tricky if the lender is not local, as agents won’t be sure how that lender will be performing.

There are quite a lot of shady mortgage lenders out there, who make promises to unlucky borrowers that go unfulfilled. What’s worse, when you’re dealing with one that is out of the area, it’s not like you can drive down to their office and give them a piece of your mind. The best thing to do is to get approval from a lender within the area you are looking to buy a home in.

Submitting Pre-Qualification Rather than a Preapproval Letter

Most preapproval letters state that the loan officer or mortgage broker has received an application for a loan from a borrower, period. A preapproval letter states that the borrower’s file has been submitted and approved. This also means that the borrower’s credit has been reviewed and approved, as well as the borrower’s employment and assets.

You’re going to want to submit the preapproval letter, not the pre-qualification letter to the person selling a home.

Submitting a Loan Approval Letter for More Money Than Your Offering Price

Submitting a loan approval letter for more than the offer of the purchase is basically saying that you have more than enough money to overpay. Under no circumstances do you want this to happen, as you will end up spending a lot more money than you planned.

A good rule of thumb to follow is to always hire a seasoned real estate agent in your area that can help walk you through the home buying process. They will be able to handle a lot of the heavy lifting for you that you probably won’t want to do yourself, and do it better than you can as well.

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