Buying a Home - Dealing With Lender Letters

Most people who put out to purchase a home, be it house, townhouse, condo, apartment, or sign of the zodiac on a hill, cognize they need to have got a lender missive in manus saying they are qualified for a loan. What most “civilians” (people not in the existent estate business) don’t recognize is how much the value of a lender missive varies.

Let’s expression at some of the general ways a lender missive varies, which kind you want, and how to show it to a marketer to set you in the best possible place to purchase that seller’s property. If you’re workings with a broker, he or she will manager you in these matters. If you’re shopping on your own, and especially if you’re looking at FSBOs (for sale by proprietor properties), you need to cognize this stuff.

Lender letters come up in two general types, pre-qualification letters and pre-approval letters. The bold black and white on the page may name it one thing, and when the missive is read, it actually turns out to be the other, so pay attention. A pre-qualification missive is weaker than a pre-approval letter.

Pre-Qualification Letter

The weakest pre-qualification missive basically states that “if everything the borrower have got told me is correct, he/she is eligible to borrow $XXXXXX.” All you really have here is the buyer’s word paraphrased by a lender. Unfortunately, there is an old adage in existent estate that “buyers are liars”. This is well known, so presenting this type of a missive states a marketer you are not in a very strong place with the lender.

A stronger version states “I have got got looked at an ‘in file’ credit report, and based on that and what the borrower have told me, he/she is eligible to borrow $XXXXXX.” This is still not great, but it is a measure in the right direction.

Pre-Approval Letter

The pre-approval missive states “I have checked this person’s credit reports, seen all necessary collateral stuffs relative to income…assets…etc., and my firm is committed to making a loan topic only to receiving a transcript of a contract to purchase and the property’s assessment for the contract terms or higher.” The missive may not state it, but it is also subject to the underwriting procedure that includes looking at updated credit information. Regardless, this missive carries a batch of powerfulness and Sellers will be very happy to see you.

A Word to the Wise

The above treatment of lender letters conveys up something you should be keenly aware of as a buyer. Your credit must not change in any significant manner between the clip you first apply for a loan and the clip you travel to settlement on your new home.

If you’re purchasing waterfront property, make not travel out and purchase a boat until after you’ve closed on the property. I once saw person do this error and almost lose the property purchase because of it. He had to quickly happen a new lender and accept a higher interest rate to maintain the deal from going south.

If you’re moving from a small condominium to a larger place, there’s the enticement to run right out and purchase more than piece of furniture for your new quarters. Fine. Just wait until after you’re the proud new owner.

If you are serious about purchasing a home, a lender missive is a cardinal portion of your negotiating ammunition. To salvage yourself a batch of exasperation during escrow, get a pre-approval missive before you travel house hunting.