Do pre-approval letters still matter?

Asked by melia, 94041 Thu Jan 31, 2013

I'm looking to purchase my first home. Though I'd love a SFH, my price range is in the 700k range and for Mountain View, that will most likely limit my options to a townhome. I love MV and work here too, though I'm looking at Sunnyvale as well.

I've got a comfortable income at 250k, no debt and looking to down about 15%. From what I've seen on msg boards, lots of offers are going in with more cash on hand and lots of multiple offers. I'm shopping around for a mortgage. Will multiple loan applications reflect negatively on my credit? Does being pre-approved still matter in this market?

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22
Jennifer Fiv…, Agent, Red Hook, NY
Thu Jan 31, 2013
Before showing you houses an agent will want to know that you are qualified, so yes the pre-approval letter does matter.

Concentrate on finding a real estate agent to help you navigate the process including recommendation on mortgage professionals.

Being debt free and with that income, it seems you should be able to achieve
your goal.
3 votes
Good Reply.....Precise and to the point.
Flag Tue Mar 12, 2013
Juliana Lee, Agent, Palo Alto, CA
Thu Jan 31, 2013
Yes, Pre-approval does matter but pick your real estate agent first.

Experienced real estate agents know which loan agents and lenders can best handle what you want to do. Even large banks can earn a bad reputation, perhaps temporarily, when re-organizations delay getting a loan funded.

Many loan agents will provide very good advice to a top real estate agent's clients without going through the last steps of preapproval and they will do everything they can to back up what they tell you when you are ready to apply for the loan. The loan agent wants to have an excellent reputation with top real estate agents. It is possible to have everything in place ready for the last few steps.

Work with an experienced agent, and save yourself time and money.

If you look at recent Mountain View home sales, http://julianalee.com/mountain-view/mountain-view-home-sales.htm , you can see that a few single family homes are selling in the $700k to $800k range.

I would love to chat with you. Give me a call...

Juliana Lee
Cell: 650-857-1000 homes@julianalee.com
Top 3 agent nationwide at Keller Williams Realty

Over 20 years experience
Over 1,000 home sales completed in Santa Clara and San Mateo
.
Web Reference:  http://julianalee.com
1 vote
Grace Hanamo…, Agent, Cupertino, CA
Thu Jan 31, 2013
Hi Melia,

Thanks for your post.

First, hire a good agent to help you. Don't do this alone. A good agent will help you find a loan broker and can give you advice about the Mountain View and Sunnyvale markets.

Second, you are correct that some of the strongest offers are those with larger down payments. While you may be able to get a loan with only 15 percent down payment, this is a fairly week loan offer today. You might consider 20 percent down or more to help strengthen your offer.

Third, if you work with a loan broker, that person can "shop" loans for you with a bunch of different banks. On the other hand, "name banks" (large multi-national banks) seem to have the most prominence in loan approvals, so consider a large bank for a preapproval letter.

Fourth, unless your offer is all cash, then a preapproval letter from a recognized lender is an absolute must.

When it comes to loans and offers, here's a general view in terms of strength. This is a list from the strongest to the weakest positions:

1. All Cash Offer, No Contingencies, Documents to prove cash in the bank (strongest possible offer)
2. All Cash offer, some contingencies (more contingencies weaken offer)
3. Offer with Mortgage, Large Down Payment, No Contingencies
4. Offer with Mortgage, Large Down Payment, Contingencies (the more contingencies weaken the offer)
5. Offer with Mortgage, Smaller Down Payment (20% or less), No Contingencies
6. Offer with Mortgage, Smaller Down Payment, Contingencies

So, again, work with an agent to help you purchase your first home!

Good luck!
Grace Morioka
Allison James Estates & Homes
1.5% Listing and Up to 50% Commission Rebate to Buyers
1 vote
, ,
Tue May 27, 2014
Hi melia ,

Yes, a lot of weight is given by the way your offer is written and the details of your pre-approval letter. We empower our clients by doing a few things that give our buyers a competitive advantage. We can fully underwrite our pre-approvals. This allows you to write your offers with no financing contingency, a 10 day inspection window, and a 20 day escrow. So when your offer accepted the only thing that needs to be approved is the collateral (appraisal, title, purchase contract, and homeowners insurance). In the multiple offer situations that are the standard in this limited inventory environment, your offer will stand out, and is 2nd only to cash. It is important to align yourself with a company that will give you the advantage you need to be able to purchase the home of your dreams, and not have another offer not accepted because the lender you are working with only checked your credit, looked at your income documents, and ran it through a desktop underwriting system. Underwriters make decisions on loans, not loan officers. Having a fully underwritten loan with a TBD property will ensure you put yourself in the best position to get your offer accepted.

Regards,

Mark DeWitt
V.P. Branch Manager
HomeStreet Bank
(858) 212-7054 Direct
(760) 331-2063 Fax
NMLS #633211
Mark.DeWitt@HomeStreet.com
http://www.homestreet.com/mdewitt
http://www.linkedin.com/pub/mark-dewitt/3b/100/59b/
0 votes
, ,
Wed May 21, 2014
Melia: Having your loan actually 'Lender Approved' is an upgrade from Preapproval.
Have your lender assemble a complete loan package and submit it to the underwriter.
Because I am a mortgage banker, I am able to send your loan package with all documentation necessary with the acception of the specific property details.
I then issue a letter along with the actual loan approval that shows all conditions have been met (with the acception of appraisal and contract).
This will usually counteract any concerns about cash vs. no cash.
0 votes
Finance1onli…, , Los Angeles, CA
Thu Apr 24, 2014
In my opinion they do. However it takes a long time to get a real approval from lenders these days. A stated income loan is a good way to go if you are in a hurry. Turn times are faster because there is less red tape. See http://www.finance1online.com/stated-income-loans for more stated income loans information.
0 votes
Scott Godzyk, Agent, Manchester, NH
Tue Feb 11, 2014
Stick with 1 LOCAL and TRUSTED bank or mortgage company. Avoid online mortgages. It could be a waste of time and money to explore several lenders as most will have rates very similar. The KEY is customer service, being local, being abte to meet them or drop off docs in person and them being there when YOU need them
0 votes
My NC Homes…, Agent, Chapel Hill, NC
Tue Feb 11, 2014
Being preapproved is critical if you need a mortgage and want any offer you make to be taken seriously.
Pre-approval isn't the same as pre-qalified which is and always was a worthless piece of paper. If you get pre-approved by one lender than virtually any lender will approve you. You should shop around first and compare rates and terms and then pick one to pre-approve you and no it won't negatively impact your credit unless you get several full pre-approvals which is pointless.

My suggestion would be to start off finding yourself an experienced buyer broker (see link below) and then sit down with them and allow them to suggest a few local lenders you could speak with.
0 votes
Love Jimenez, Home Buyer, Allentown, PA
Tue Feb 11, 2014
Hi I'm looking to buy a mobile home and the. Park. As to approve. Me what they looking for in this process
0 votes
Home Buyer H…, , Tallahassee, FL
Mon Feb 11, 2013
Hello Melia,

When I was in the mortgage business, I always would tell my clients that having a pre-approval letter is much like having the cash.

So you want to select a lender you think will be able to best help you. Choosing a lender then becomes the challenge.

So you want to get all the mortgage information you need together before going shopping for that new home. Many real estate agents will ask you this anyway.

Avoid getting multiple pulls on your credit score, it makes lenders nervous when they see way too many. Perhaps you will want to check out my profile, I have helped many people understand the mortgage process. I have a FREE website with well over 600 pages of information.

Best Wishes,

Jeff Ragan
0 votes
opondomusa, , 10020
Sun Feb 3, 2013
Like many things in life, buying a home is a process, and there are necessary steps that must be taken. The first of these is getting pre-approved for a mortgage. In fact, it's an important tool for all parties involved. Lenders use it as an opportunity to learn more about their potential borrower's income level and credit score. Borrowers like it because it allows them to calculate their potential mortgage payment.

Sellers and real estate agents use a pre-approval as proof that a buyer can afford a mortgage and bid on a property.
0 votes
Robert Spino…, Mortgage Broker Or Lender, Mill Valley, CA
Fri Feb 1, 2013
Melia,

I'm actually going to address just about every concern you have above in a free webinar I'm hosting next Tuesday, Feb. 5. Please feel free to join us --- I think you'll get a lot from it.

I will just say, "yes," I feel that pre-approval letters carry a lot of weight and there are some things in addition to the letter that you can do to optimize your chances of having an offer accepted. We're going to cover these too...

Rob Spinosa
RPM Mortgage
rspinosa@rpm-mtg.com
0 votes
Lance King, Agent, San Francisco, CA
Fri Feb 1, 2013
Choosing your agent/broker first is a good idea. If they are good they can provide you with referrals to great lenders are anything else you need in the process of buying your property. If they can't, you have the wrong agent....
0 votes
Terri Vellios, Agent, Campbell, CA
Fri Feb 1, 2013
Do select your buyer's agent/broker first. The team of professionals are your best source to getting a home in today's market.

Grace put together a great example on how one's offer stacks up against other offers. When there is a loan contingency the lender you are using is factored in as well as the agent representing you.

Have an amazing day!
Web Reference:  http://www.terrivellios.com
0 votes
Elena Talis, Broker, Palo Alto, CA
Thu Jan 31, 2013
Preapproval letter definitely matters. But I would not shop for a loan now - I would try to find a loan broker (independent or at a bank) who understands the market, is reputable and known to the agents in the area and can deliver predictable closing time. Talk to your friends, call real estate agents, ask for referrals and interview loan brokers. When you will be able to identify the broker you are going to work with do all the paperwork and get a preapproved. It is hard to buy a property in Silicon Valley now and people on your team matter most of all.
Web Reference:  http://talisrealestate.com
0 votes
Sophie Luu, Agent, San Jose, CA
Thu Jan 31, 2013
Dear Melia,

The pre-approval letter will definitely matter. Make sure you have one from the direct lender is recommened in this market. Any application of Loan will run your credit score each time. I do not recommend you to make some applications. It is better you find an full-time professional and trustable agent to work for your best interests. In this market, you will definitely need a good agent to work, because She/He will know how to handle this crazy market !!
0 votes
Glenn Cooper, Agent, Greenville, AL
Thu Jan 31, 2013
In this day and age, pre-approval letters are vital. With lenders imposing more and more guidlines it is harder than ever for buyers to get approved for a new home loan. You don't want to find your dream home only to find out that you cannot get approved for a loan.
Also, with a pre-approval letter, you will save yourself the heartache of looking at homes that are priced higher than the amount of your pre-approval. The last thing you want to do is get your hopes up and become frustrated when you see that the houses you are looking at are price too high for your budget. If your agent knows your price range and specifications, he or she can make your buying experience a much more pleasant experience. It also makes you more attractive to a seller when you go to place an offer. They just might be more inclined to take your offer seriously and become more willing to negotiate.
0 votes
Lynn North, Agent, Los Altos, CA
Thu Jan 31, 2013
No only do preapproval letters matter, but it is critical that it is from a known lender or underwriter, as you're competing against all cash offers. Please contact me and I can refer great lenders. I can be reached on 650.703.6437 or email on lnorth@apr.com. With today's lower rates, you might find you can get exactly the right type of home and area too! Looking forward to working with you! Best, Lynn North
http://www.LynnNorth.com
0 votes
Dan Tabit, Agent, Issaquah, WA
Thu Jan 31, 2013
Melia,
Without a pre-approval any offer you write will not be considered. They matter a great deal unless you are paying cash, then you need to provide proof of funds.
As far as multiple applications, try and get your loan shopping done as early as possible. Inquiries into your credit status within 10 days my multiple lenders are only supposed to count as one inquiry. Each time a lender pulls your credit, it will affect your score a little bit. If your scores are well above 740, you'll qualify for the best rates and terms.
One other factor to consider, by meeting with lenders early, you'll know about the programs available to you and what your options are. High balance and Jumbo loans have different requirements that you will want to know about when deciding how much you really want to spend.
0 votes
Lance King, Agent, San Francisco, CA
Thu Jan 31, 2013
Being pre-approved - and I mean pre-approved, not pre-qualified - is more important now than ever because guidelines are so much stricter than they used to be.

Last I checked getting pre-approved knocks 5 pts off your score and comes back after 90 days, but you can check with your lender.

Keep in mind that most listing agents won't even look at an offer that doesn't have a solid pre-approval.
0 votes
David Myers, Agent, Warner Robins, GA
Thu Jan 31, 2013
I belief that you should always get pre approved before you look at homes that way you know when you find your dream home you know you can buy it!
0 votes
Terry Farnsw…, Agent, Lisle, IL
Thu Jan 31, 2013
Shopping around for a loan shouldn't negatively affect your credit. It is understood that most consumers are going to have at least a couple lenders run their credit when shopping around for the best rates.

Pre-approvals definitely matter - in fact - it's probably the single most important component of your offer.
0 votes
In my opinion they do. However it takes a long time to get a real approval from lenders these days. A stated income loan is a good way to go if you are in a hurry. Turn times are faster because there is less red tape. See http://www.finance1online.com/stated-income-loans for more stated income loans information.
Flag Thu Apr 24, 2014
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