"Why do I need a pre-approval letter to submit a contract?" I hear that question with about 1 out of 3 new clients that I meet. It's simple. The seller wants to know if you can buy the house. A pre-qualification letter may suffice for some sellers, but I'm running into more and more banks that won't accept a pre-qualification letter in place of a pre-approval letter.
A pre-qualification letter is a letter based upon information given to a lender, but isn't necessarily verified. For instance, I may have a client call a lender who will take his information over the phone and then formulate a dollar amount the buyer would qualify for if the information is verified. It's a simple process.
A pre-approval letter is going to include verification of income, debt, credit, available funds, etc. It's much more valuable in a bidding war because it gives a seller up front information that will not have to be verified after the offer is accepted. It speeds up the process and gives a seller confidence to accept an offer.
When you are ready to buy a home, start at your lender's office. Find out what price property you are qualified to buy, and then contact your Cornerstone agent to find that home. In today's competitive real estate market, you want every possible advantage when it's time to buy.