You Need A Mortgage Preapproval Letter With Your Offer
Great info from an Article Published in USA TODAY on Feb. 14th, 2017
What is a mortgage pre-approval?
A mortgage pre-approval is essentially the same thing as applying for a mortgage, just without a specific home in mind. You go to a lender, fill out their application, and probably pay an application fee.
The lender then runs a credit check, requests documentation about your income, assets, and employment history, and verifies all your information. They will then pre-approve you for a certain maximum loan amount, which is generally good for a specific amount of time (90 days seems to be common). You'll receive a pre-approval letter, which represents a firm commitment to lend you that amount of money for your home purchase.
Why it's so important
There are a few key benefits of a mortgage pre-approval, and I strongly suggest that no prospective homebuyer start the process without one. or starters, a mortgage pre-approval makes a submitted offer much stronger. You're essentially telling the seller "Hey – I'm a serious buyer and actually have the ability to buy this home." (Be aware that the lender can give you a pre-approval letter with a lower dollar amount, so the sellers won't know your maximum budget.)
In addition, you'll know exactly how much house you can afford, so you can plan your home search accordingly. This way, there are no surprises when you fall in love with a particular home and then apply for financing, only to discover you can't afford it.
Also, you may be able to lock in a certain interest rate when you get pre-approved. When interest rates are expected to rise (like they are over the next few years), this could potentially be a big benefit.
A pre-qualification is not the same thing
Don't be fooled – a mortgage pre-qualification is not the same thing as a pre-approval. Not even close. A pre-qualification is an informal process where you provide a lender information about your debts, income, and employment situation, and they tell you how much of a mortgage you should qualify for. It is not a firm commitment to lend, and therefore does not carry as much weight with sellers. A pre-approval is the home buying tool that you want in your pocket as you begin the shopping process, so be sure you're getting the real thing.