You may or may not have heard of this but if you plan on buying a home this is a powerful piece of paper to posess.
Whether you are a first time home buyer or you have done this several times in the past, if you plan on financing your Wenatchee real estate, it pays to have all your ducks in a row before submitting an offer. Many sellers want to know you are a serious buyer before going forward with the real estate transaction. If they feel you are wasting their time, they might start asking some pretty invasive finance questions to you or your agent. They want to know you have the means and the motivation to purchase a home and are not just stringin them along. This is where a pre-approval letter comes in handy.
When you finance a home, you will need to contact a lender via a bank or mortgage broker and determine how much money you can actually spend on a home. The lender will go over all your finances and pull credit reports to determine how much in a monthly mortgage payment your income can support. Lenders look at all your out go and your income and evaluate your debt to income ratio. If you have too much going out and not enough coming in, you may not be approved at all. It's a good idea to have all this under control yourself before sitting down with a lender. Now is not the time for finding out how much money you don't have.
Once the figures have been worked out the lender will give you a price range or a maximum amount of home you can afford. Be sure and ask if the payment will include taxes, insurance and any other fees. This can be paid with your mortgage payment or separately.
The lender can then issue you a pre-approval letter stating you have been approved up to a certain amount. This is the letter you submit with your offer stating you can afford the home you are offering on. It gives the seller some piece of mind that you are not wasting their time and are serious about buying their home.
How the Pre-Approval Letter Can Work in Your Favor
If you are offering less than asking price on a home you may not want to disclose to the seller you can afford all they are asking. In this case it helps to have a lender that you have a personal relationship with. For example: If you found a home listed for $300,000 and you have been approved for this much but want to offer $270,000 for the home you may not want to tell the seller you have been approved for this much. Instead have the lender write the pre-approval letter for just what you are offering. The seller may assume you are offering less because that is all you can afford. If they are a motivated seller, they may agree to the lesser price. If they know you can afford more, they may immediately counter offer for full price knowing you are just trying to low-ball them.
This is where a good buyers agent really earns their keep. They negotiate on your behalf without revealing too much of your finances. Unless required by law, most of your finances are confidential and only need to be disclosed to the lender. Ask us for more information on your specific transaction.
For more tips on why a pre-approval letter is important or to get in touch with a lender we trust, please contact us anytime. We want to be your Wenatchee real estate experts.
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