Preapproval letters, also called prequalification letters, are an important part of the modern home buying process. Many of my clients who have been down the home buying path before get upset when asked for a preapproval letter by a realtor before the realtor will even take them to see houses. I have been told by a number of clients that they felt insulted at the request, and that it is a complete waste of time. But with the difficulties home shoppers are having with financing, most realtors have been burned by prospective clients who can’t get the loan they thought they could.

At least with a preapproval letter, a realtor can feel confident that the customer’s financials have been reviewed by a qualified mortgage specialist, and often an underwriter, and that this buyer should be able to get financing for their new house. This letter also helps both the buyer and the real estate agent set a price range to consider when looking at houses. Lending guidelines 10 years ago were very different than they are now, and for those who have not kept up with all the details of the changes, it can be difficult to realistically measure how much you will be approved for.

Finally, this letter will help a seller feel more comfortable about going into contract with you. Too many people have either had a contract fall through due to financing, or have known someone who had a sale fall through due to financing. In a situation where there are multiple bids on a house, a seller will almost always go with the offer attached to a buyer with a preapproval letter over an offer from a buyer without one. Sellers do not want to go into contract only to have the sale fall through 2 months later.

For more information on what a preapproval is and how to obtain one, click here. If you are ready to start looking for a new home, please contact me and I will get you a preapproval letter. Should you have anything to add about preapproval letters, please leave a comment.