HOW A PREAPPROVAL LETTER OPEN DOORS WHEN HOUSE HUNTING

A preapproval letter begins with the bank of your choice. You’ll need some documentation to turn into your lender. Once they review it all, your bank will then tell you what price range you can afford. In other words, what is the maximum amount you should be looking for when it comes to your search. The process is quick once you submit the required info, possibly within 24 hours. Communicating with your bank also familiarizes you with an estimated monthly payment.   

In addition, some sellers may require a preapproval letter before setting up showings with you because the seller may also want to verify that you are qualified. This ensures that your time and theirs, is being used effectively by looking at homes that are actually within your budget’s reach.    

Shop Smarter Not Harder  

Once you find “the one”, having a preapproval will expedite the first part of the offer process of a contract.  I’ve shown multiple houses or properties where buyers fell in love with the property and wanted to make an offer, but then couldn’t get pre-approved or realized that the payment would be higher than they wanted. You can easily avoid this pitfall. Getting a preapproval takes a minimal amount time but will reaps large benefits for you.  

Interest rates are changing quickly which also makes a big impact in your payment and your pre-approval amount. That is why it is important to visit with a lender to express what amount you’re comfortable paying each month. When my husband and I bought our first home, we discovered we were pre-approved for $250,000. But then we realized how high our monthly payment would be at that amount. I knew we couldn’t afford that. Financially on paper we could afford it. But we also wanted to do additional things with our money.  

After visiting with our lender, we decided we’d be more comfortable shopping for houses under $150,000. By looking at our budget in advance, we didn’t waste our time, a seller’s time, or our real estate agent’s time looking at houses in a price range we weren’t comfortable purchasing. Not to mention, viewing homes in the higher price point would’ve set us up for major disappointment when would’ve shifted to the lower price point. 

Advantages of Working with A Local Lender for a Preapproval 

 Local Lenders Offer Competitive Packages 

 Major corporate lenders advertise and promise low interest rates and quick closings. However, they are also great at hiding the flaws of their company. In my experience, local banks provide competitive rates and “packages” as much as a major corporate bank does. I work with numerous local lenders who offer comparable rates and lower closing costs (once you find the house) than most out of town lenders. In some cases, I’ve seen closing costs that were double than that of the local lender. So interest rates are not the only thing to consider. Closing costs will have a huge impact as well. 

 Local Lenders Provide Creative Financing Option 

Local lenders also provide numerous loan options. A lot of times they can get you in a conventional loan for 3% or 5% down, not the commonly heard of 20% (even though they have those too). They also offer USDA loans (0% down), FHA (3.5% down), and options to get assistance with your closing costs where you don’t have to bring any money to closing. And because they are local, you can avoid long waits on the phone to talk to someone. You can sit face-to-face with a local lender.  

 A Local Lender Puts in the Extra Work Because They Live in the Community 

Local lenders also pour back in to your community. They donate time and money to sponsor events and usually take pride in treating their customers with respect. These lenders live in your town or near you. That means they have an invested interested in making their clients feel valued. I know many who work after 5 p.m. to take care of their clients. On top of that, a local lender stays in close contact with your real estate agent for updates, status, and provides needed information to move the transaction forward. They also communicate promptly with the title company which can be a crucial component in meeting your expected deadlines and close date.  

A Local Lender Gives You A More Personal Experience 

Having a lender who knows you and your family or your story, gives you and the lender a more personal experience. Many times, you might even see your local lender at kid’s sporting event, a store, or out dining. On the other hand, a corporate lender involves a less personal approach and may pass you on to someone else in the company throughout the transaction. Also,  the one-on-one personal commitment may be lacking when working with an out-of-town corporate lender.  

Regardless of which bank you choose, a preapproval letter is the best first step to buying your house or property. This letter informs and equips you to face the real estate market with boldness. Once you have it, you’ll hunt for houses with courage and confidence, knowing you are qualified and the target price range you want to pay. A preapproval letter puts you ahead of a buyer who has not taken the time to do it. But if you still are not sure, I’m free to talk to you about getting started. Or you can contact the real estate agent you plan to work with in the future. Either way, a preapproval letter benefits everyone involved. 

About the Contributor: Kati Adair’s strong work ethic continues to serve her clients both locally and nationally. Her success’ credit goes to her recurring customers and new ones she encounters along the way. She ensures her clients receive the best possible experience when buying or selling. Even though she holds a Master’s degree in Educational Leadership, she continually progresses as a real estate agent, going above and beyond in receiving the nationally recognized Graduate Realtor® Institute (GRI) designation. Through the years, Kati has proven to be a top-contender among agents in Hopkins County. She can be found at the multi-million dollar producing office, Janet Martin Realty.