In today's market, having a well written letter of loan approval from a recognized mortgage lender is crucial!
As a matter of fact, if you are planning to buy a home in Central Florida, it's becoming more and more common for listing agents and Sellers to require that the Buyer be pre-approved for a loan prior to even seeing their home.
With the "meltdown" of the mortgage market, the underwriting guidelines for most programs have changed significantly over the past year and continue to do so on an ongoing basis. While getting "pre-qualified" may have been good enough in years past, it's proving not to be good enough today for many Sellers.
"Pre-qualification" for a loan simply means that the borrower (hoping to become a Buyer) has provided verbal information to the lender and as a result, the lender has issued a letter to the borrower stating that they are "pre-qualified" but that "loan approval" is contingent upon verification of what the borrower has shared verbally. This is the weakest proof of ability to buy.
"Loan approval"is when the borrower has gone one step further and the lender has verified the borrower's credit score, income, assets, debt, money needed to close, employment and other conditions of the loan program the borrower is applying for and after review, the lender "approves" that borrower for a specific loan amount.
At that time, the lender also shares with the borrower what their estimated monthly payments will be, including the principal, interest, taxes and insurance so that the borrower is well aware of what type of mortgage payment will be associated with that specific loan amount.
Short of securing a "loan commitment," which is the strongest form of an approval (as the lender has already submitted the documents related to the borrower and the property they are purchasing to a underwriter), a "loan approval" is accepted by most Sellers and their Real Estate agents as documentation that the borrower is qualified to purchase the home they are making an offer on.
While there may be an excess of inventory on the market in most areas, if a Buyer wants to assure that the Seller will take their offer seriously, it's wise for them to ask their lender to provide a well written loan approval letter that communicates the following (at a minimum):
- Loan amount borrower is approved for
- Verification of income
- Verification of assets
- Verification of employment
- Verification of monies needed to close
- Type of program the Borrower is applying for (conventional, FHA, VA)
- Verification of acceptable credit
- Closing cost assistance needed from the Sellers (if applicable)
- Time period needed for final underwriting
Even though there may be fewer opportunities today when a Buyer's offer is in competition with others, it's always smart to assume that the Seller will weigh the approval letter as strongly as they weigh the contents of the offer.
As a Buyer's Agent, I make sure that every offer I write on behalf of my customer is accompanied by a well written loan approval letter. As a result, the Buyers I advocate for almost always have their offer accepted!
To find out additional ways to position your offer to win, contact me at (321) 377-0157.
LaShawn Norden, PA, REALTOR, RE/MAX Central Realty, (321) 377-0157, LaShawn@LaShawnNorden.com
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