The Mortgage "Pre-Approval" Process (Obtaining a "Lender's Letter")

 

     In the Northern Virginia real estate market it is customary to include a Lender's Pre- Approval Letter (also referred to as a "Lender's Letter") along with your contract offer paperwork to purchase a home.  Your Lender's Letter shows the Seller (who typically does not know you) a 'snapshot' of the Loan Type that you are pursuing, the Loan Amount you are applying for, and the company who will be providing you the Loan (the Lender).

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     We advise our Buyer Clients to obtain their Lender's Letter before we begin to look at specific  properties.  There are many reasons for this:

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     Obtaining your Lender's Letter first means that we can focus our house-hunting efforts on the homes that you are qualified for.  Depending on the current market trends, this may mean limiting our search to homes that are under your maximum (such as in a strong Seller's market where homes are selling for over List Price), or expanding our search a bit over your maximum (such as in a strong Buyer's market when short-term home values are declining), or right at your targeted maximum if the market is more balanced.

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     Sometimes the 'right' home presents itself sooner than you may think.  Not being ready to act on a home that you love, or, worse, losing out on a home because you weren't prepared is stressful and unnecessary. 

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    Other Buyers might also love the home that you've just found and want to own!  It never hurts to be prepared.  If your interest in a home turns competitive, it's best to have your Lender's Letter ready in order to act first and have the Sellers choose your well prepared and complete contract package.

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     You'll know your costs, including your interest rate and closing costs, so you can act!  Having your Lender's Letter means that you've already had a detailed conversation and initial application with your Lender of choice.  You'll know your down payment requirements, approximate monthly payments, as well as your estimated closing costs - - in other words you'll know what your costs are and if you can 'stretch' if a truly perfect home comes along!

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     We'll know how to structure the offer.  When it's time to write an offer, we need to know if we are going to negotiate based on the Sales Price alone, or if you need some assistance with your closing costs (as many Buyers do).  We'll need to know if we need to structure those Seller-paid closings costs (known as a "Seller Subsidy") into the negotiations.  For some Buyers,   a Seller Subsidy is necessary to make their purchase with their more limited cash resources.

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