Should I Get a Mortgage Pre-Approval Letter Before Making an Offer?

Should I Get a Mortgage Pre-Approval Letter Before Making an Offer?

We get asked this question all the time. The short answer, you don’t have to, but it is highly recommended and will usually improve your chances of securing a contract on the house or condo you want to purchase.

A mortgage pre-approval letter is assurance from a lender to provide you with financing to buy a home up to a certain loan amount. It shows sellers that you’re a serious homebuyer and that you can secure a mortgage – which makes it more likely that you’ll complete your purchase of the home. You do not have to have a pre-approval letter to look at a property with a realtor, but we do like and encourage our buyers to speak with a bank or mortgage company before looking to get an idea of how much they can comfortably spend on a home or condo.

 We asked one of our favorite Oxford lenders, Gentry Collier of Regions Bank, if she thinks it’s important for a buyer to present a pre-approval letter when making an offer. Gentry shared, “I think providing a pre-approval letter shows the seller that a buyer is serious. It lets them know that the buyer has taken the time to explore financing options, have their credit run, and make sure they are able to get a loan. It gives the buyer an advantage over other potential buyers.”

There is a difference between a pre-approval letter and a pre-qualification letter. A pre-approval letter is the real deal, a statement from a lender that you qualify for a specific mortgage amount based on an underwriter’s review of all of your financial information: credit report, pay stubs, bank statement, salary, assets, and obligations. A pre-qualification letter means that a lender has evaluated your creditworthiness and has decided that you probably will be eligible for a loan up to a certain amount.

Thanks to realtor.com, you can read more about providing a pre-approval letter here and the differences between a pre-approval and pre-qualification here.