Do you typically sent a mortgage preapproval letter before agreeing on a price for property.?

Asked by Bob Carbone, Park Slope, Brooklyn, NY Wed Jun 1, 2011

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Don Tepper’s answer
Don Tepper, Agent, Burke, VA
Wed Jun 1, 2011
Good advice already.

One thing to avoid is to send a blanket preapproval letter with some figure in it--such as "Buyers are preapproved up to $400,000." Suppose you're negotiating on a property. The seller's asking $400,000 and you want to offer $350,000. Well, that preapproval at $400,000 is going to signal to the sellers that you can afford to pay the full asking price. The sellers are going to be less willing to sell it for much less.

Instead, as Sally suggests, have the letter state that you're preapproved for whatever figure you're offering . . . say $350,000. That gives the seller assurance that you ARE qualified for what you're proposing, but doesn't give away what you can go up to.

An alternative used by some investors is to have multiple prequalification letters, each with a different amount--such as $350,000, $375,000, and $400,000. That way, they've got a letter that matches closely what they're offering, without revealing what they can go up to.

Hope that helps.
1 vote
Sally Grenier, Agent, Boulder, CO
Wed Jun 1, 2011
I always send a pre-approval letter with my clients Contract to Buy. And I ask the lender to write the letter so it states the buyer is approved for the price we are offering. Having a pre-approval letter gives your offer more credibility, and shows the seller and the listing agent that you are a serious buyer and have begun the process of applying for a mortgage.
Web Reference:  http://www.sallygrenier.com
1 vote
Dana Lewis, Agent, Colts Neck, NJ
Mon Jul 23, 2012
You should contact a lender for a pre-approval so you and your agent know ahead of time what you are qualified to purchase. If not, you are all just window shopping. When it comes time to make an offer the approval should state the offer price, you might know you can go higher but you might not want to offer that information at the onset.
0 votes
Scott Godzyk, Agent, Manchester, NH
Fri Jun 10, 2011
Bob you most certainly do want to have a mortgage preapproval if you are a buyer and submit it with your offer. It tells teh seller syou are serious and you are quailified to get a mortgage. Most all banks will request it if you are making an offer on a bank owned home.
Web Reference:  http://www.ScottSellsNH.com
0 votes
Jeanne Feeni…, Agent, Basking Ridge, NJ
Fri Jun 10, 2011
Yes, agree with others - here in NJ the mortgage preapproval - or if a cash deal, proof of funds - is considered a prerequisite for an offer. A seller is well advised not to consider any offer seriously without it. The seller is evaluating a buyer's ability to close - to do that, confirmation of monies must be established.

Best,
Jeanne Feenick
Unwavering Commitment to Service
Web Reference:  http://www.feenick.com
0 votes
Jeanne Feeni…, Agent, Basking Ridge, NJ
Fri Jun 10, 2011
Yes, agree with others - here in NJ the mortgage preapproval - or if a cash deal, proof of funds - is considered a prerequisite for an offer. A seller is well advised not to consider any offer seriously without it. The seller is evaluating a buyer's ability to close - to do that, confirmation of monies must be established.

Best,
Jeanne Feenick
Unwavering Commitment to Service
Web Reference:  http://www.feenick.com
0 votes
Francesca Pa…, Agent, Manasquan, NJ
Thu Jun 9, 2011
Here in NJ, absolutely. Understand that there are differences b/t NY and NJ as to how RE is conducted.
Web Reference:  http://www.PatrizioRE.com
0 votes
Jeanne Feeni…, Agent, Basking Ridge, NJ
Thu Jun 2, 2011
Hi Bob, a preapproval is a prerequisite for an offer to be taken seriously - actually even that is an understatement - for an offer to be considered, a preapproval from a reputable lender or proof of funds if a cash deal must accompany the offer. And I like the reminder from Don to send one that is tailored to your offer. You can update it as negotiations proceed, but a blanket preapproval can "show your cards" by exposing the range of your budget. A tailored preapproval, referencing the property also shows that the mortgage rep has considered the specifics of the target property - taxes, maintenance fees if common ownership.

Best,
Jeanne Feenick
Unwavering Commitment to Service
Web Reference:  http://www.feenick.com
0 votes
Ron Rovtar, Agent, Boulder, CO
Wed Jun 1, 2011
Sally gave a very good and concise answer below. It should be noted that the pre-approval letter is how you tell the seller that there is a good chance you can close the deal. Were I the seller's agent, I would strongly suggest that the seller never accept an offer without an appropriate pre-approval or other "due diligence" documentation indicating the money will be there at closing.

Best,
Ron
0 votes
David Burnham, , Washington, DC
Wed Jun 1, 2011
I agree with Sally. Always send it on your first offer. I seldom update it when we send a counter offer at a higher price.
0 votes
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