What is a Pre-Approval Letter? It is a letter from you mortgage loan officer confirming that they have examined your finances and that you are able to finance a home. It provides the critical information you need to help you with your home search. It will answer questions such as how much house can you afford? What is your interest rate? What type of loan product is it?

In order for your loan officer to provide you with a pre-approval letter, he will need to examine your financial health. You will need to provide some information:

  • Driver’s License or Photo ID
  • Social Security Number
  • 2 years of most recent tax returns
  • 2 months most recent bank statements
  • Last 2 pay stubs

There may be more documents based upon your specific circumstances, such as a DD-214 if you are military, or employer letters if you haven’t been with your employer very long or you are relocating for work. These documents along with your credit report will determine your financing ability. You may be surprised to find you qualify for more than you thought. Or, you may be surprised that there are things you need to address before you can purchase a home. Either way, you have to know before you can begin house shopping.

The pre-approval letter is what your realtor will use to guide the home search regarding pricing and loan product. It is also how you show sellers that you are a serious buyer. You are not only willing, but you are ready and able to buy their house. Many sellers will not accept an offer unless it is accompanied by a pre-approval letter.

So, before you show, you have to know. Get your pre-approval letter. And, a good rule of thumb is to use a local lender. Financing is a personal business. You are sharing your financial history with someone, so make it someone you can meet face-to-face. Not to mention, sellers are more comfortable with local lenders too. Ask your realtor who is a good lender to use.

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