Approving Preapproval

A critical step for many homebuyers is being approved for the mortgage loan required in the purchase of a home. There are several definitions to a preapproval letter, but in the most general terms it is a letter from a lender that a buyer has met a certain criteria for being approved for a particular loan amount. It is by no means a final approval, but it is generally an essential item for any buyer purchasing a home using money borrowed from a lender.

Getting preapproved is a simple process. Most lenders have a basic questionnaire that must be completed first.  They use this information to determine the amount of money the buyer can borrow. The lender will also need to access the credit report of the buyer to make a final decision about issuing the prepparoval letter. This letter is then submitted with any offer to buy a property. It tells the seller that a lender has given initial approval for a buyer to borrow the necessary money to buy the home. Without such a letter, the seller would have no proof that the buyer can actually afford the house. Both buyers and sellers need to know that this preapproval letter is not a definite confirmation that the mortgage loan will be approved in the end, however. Financial situations can change for the buyer leading to a denial of the loan, and any offer made by a buyer will have a contingency written in protecting the buyer should their financing collapse. 

There are several reasons why getting a preapproval letter is important. First, it does give sellers proof that a lender has taken a look at a buyer's finances and determined that the buyer can afford a certain loan amount. It also gives buyers an idea of how much they can spend on a new home. Wants the point of looking at homes that cannot be bought? In today's market, it allows buyers to act quickly. Homes are going off the market at a rapid pace, and buyers do not want to lose out on their dream home because they are waiting for preapproval from a lender.

If you have any real estate- related questions, feel free to contact me at ryan.guilmartin@gmail.com or 617-852-0040. Happy house hunting!