Many Sellers Will Not Even Accept An Offer Unless It Is Accompanied By A Lender S Letter

Category: Finance, Mortgages.

Most real estate purchases are bought with loans so getting a good faith estimate and pre- approval letter from your lender helps the process start off on the right foot.

It lists out the estimated closing costs, and interest rates, monthly payments for the loan program you are looking at getting. The good faith estimate, or GFE for short, is required by law to be provided by lenders when you are seeking a loan. The pre- approval letter is provided by lenders once they have run your credit and get your income/ debt information. There are also additional benefits to getting pre- approval and GFE before you even begin the property search. By getting the GFE and pre- approval letter, you can be confident that the loan will get processed with no surprises. For one, by discussing your debt to income ratio with your lender and obtaining the GFE, you can determine your maximum price. You can find an area in your price range that fits your needs and narrow down your search.

It helps to know the maximum sales price when shopping around so that you do not waste time and energy looking a over- priced properties, and also vice verse, you do not waste time and energy looking at under- priced properties. You also will determine your monthly payments with the GFE. If the monthly payments are higher than you wanted, then you can adjust your sales price to be lower. The monthly payments should include the property taxes, principle, insurance, and interest plus any private mortgage insurance( PMI) . Another reason to get your pre- approval and GFE before starting your home search is that you may find out some issues with your credit or financial situation that you could clean up before moving forward with a purchase. And with a lower credit score, I would have gotten a worse interest rate on the loan.

For example, the first time I bought a house, I found out that I had a$ 50 charge on my credit report from 3 years ago, which brought my credit score down. I say would have because I was able to pay off this collection and clear up the ding on my credit before going into the loan underwriting process. This helps with presenting offers and negotiating. Finally, by getting a pre- approval letter, you have proof for a seller that a lender has confidence in being able to fund the purchase on your behalf. Many sellers will not even accept an offer unless it is accompanied by a lender s letter. Also, if you happen to get into a multiple offer situation, your offer will be much stronger with a pre- approval letter. Furthermore, if you do not have a letter, the seller may counter higher given that he feels he is taking on more risk that you may not be qualified for the loan amount.