Do you need a mortgage pre-approval letter to make an offer on a house? You know you need to get your ducks in a row before looking at homes, but does that include securing a pre-approval letter from the bank?
The truth is, getting pre-approved can actually improve your chances of falling into the sellers’ good graces, so you want to get it done as soon as possible in the home-buying process.
So how organized do your financials need to be before you start looking? Let’s take a look, starting with clarifying what a pre-approval letter actually is.
What is a pre-approval letter?
Mortgage pre-approval is assurance from a lender to provide you with financing to buy a home up to a certain loan amount.
“It’s a letter from your lender, written on the lender’s letterhead, stating that you are approved for a loan of a specific dollar amount,” says Denise Shur, a Realtor® with 1:1 Realty in San Jose, CA.
To get approved, your lender will collect a stack of paperwork from you that will include pay stubs, federal tax returns, W2s, investment accounts, and residential history. Once your complete financial portfolio is analyzed, the lender will decide whether or not to issue you a pre-approval letter.