Preapproval Letter is Buyer’s Passport

Posted by Erion Shehaj in Homebuyer Guide, Houston Real Estate, TipTuesday on Tuesday, July 14, 2009 | no responses

It is a bit counterintuitive, I’ll give you that, upfront. It seems more rational to find the house you want to purchase first, then pursue financing options. But in this market, more than ever, the exact opposite is true. The preapproval letter from the lender is the necessary passport you must have to start buying a Houston Home. You wouln’t travel to a foreign country without your passport, would you? Didn’t think so.

There are several reasons why you should (and must) get a preapproval letter first:

It’s a Seller Requirement – On bank owned property, preapproval letters are a must for the offer to be considered complete. No preapproval, no offer consideration. But in the current environment, smart agents and their Seller clients are making these letters required as well. So there’s really no way around it.
It gives your offer strength – We live in a time where many contracts fall through due to lack of ability to obtain a mortgage. When that happens all parties involved (Buyer, Seller, Real Estate Agents, Loan Pros) are devastated and they all lose money. Presenting this document upfront gives the Seller and their representatives the assurance that your contract will likely close and that goes a long way these days.
It’s a roadmap to affordability – Instead of guessing how much house you can or should buy, wouldn’t it be nice to know upfront and save any disappointments that may arise later? Find out your target price and then have your real estate agent tailor your search to it.
It could be crucial to getting your dream home – Does it make sense to look for a home, find the perfect one for you then scramble to get a preapproval letter while better-prepared competition beats you to the punch? Get it done first so you can be ready to pull the trigger whenever that light comes on in your brain at the sight of the perfect place for you.
It’s easy – Getting a preapproval letter takes just a few minutes. You spend 15 minutes to get a car insurance quote but won’t do the same for what could be the biggest purchase in your lifetime?
It’s not a commitment - The act of obtaining a preapproval letter does not oblige you to use that particular lender once it is all said and done. You can still shop for your rate and terms after the preapproval letter has been issued.

The process

Most lenders will ask you to fill out a short application form to start the preapproval process and ask for supporting documentation before they can issue your letter. As you can imagine, it would be best to be prepared and have those documents upfront so the process can go much smoother. Here’s what most lenders will ask for:

Proof of Income – Last two years W-2 forms or tax returns if self employed
Proof of Assets – All pages of last month’s bank statement to substantiate your down payment and closing costs
Proof of Identity – Copy of Driver’s License and Social Security Card
Additional Proof of Income – Last month’s paycheck stubs

With these documents in hand, you’ll have your preapproval letter faster than the Geico Gecko can say: Oy!

Get your Passport today so then you can start searching for Houston Real Estate on the coolest map search tool in the city.

Photo Credit: HJL