What is a Pre-approval Letter and Why do I Need It?

In today's real estate market here in the Santa Barbara area, one item that you will almost certainly need upon submitting any offer on a home is a pre-
approval letter from a lender....especially if there are multiple offers.
  1. What is Pre-approval Letter?

    In real estate lingo, a pre-approval letter from a  mortgage lender simply means that you have a commitment in writing from a lender to lend you a specific amount of Money to buy a home under certain conditions (e.g., length of the loan and interest rate).
  2. Why is This Important?

    For you as a buyer, it is important to have a pre-approval letter for several reasons:
    1. It will inform you, your realtor and the seller about how much you can afford to spend on a home...thus the size of a mortgage you'll be able to obtain.
    2. If there are multiple offers on a property, you will need this to just keep on a level playing field.  If you have this pre-approval, you are at least as strong as other buyers on this issue.  If you do not have this, it looks poorly on your "readiness" to purchase.
    3. A seller's main objective outside of price when looking at offers is to analyze the buyer and to make a judgment on whether the buyer will perform and thus close escrow.  Again, having a letter shows confidence to most.
  3. How do I Get a Pre-approval Letter?

      You will most likely want to talk to one or two different lenders to search out loans that will best suit your personal financial situation. The lenders will obviously require certain information from you such as your income, your current and past employment situation, any current debts such as student loans, car loans and credit card.  Lastly the lenders will need to know the source of your down payment. The lender will then use this information along with tax returns and bank statements to determine the maximum loan you will qualify for.  They will also at this time be able to give you an exact amount of your monthly mortgage payments, property taxes, insurance etc.
If you need help with any recommendations for a lender, please give me a call.  I would be happy to provide you with this information.
    For information on Real Estate here in Santa Barbara, Montecito and/or our surrounding areas, as well as any other aspects of life in our area, please don’t hesitate to contact Kevin Schmidtchen at Berkshire Hathaway.
    Thank you for reading.  I hope you find Santa Barbara Real Estate Voice informative. Please feel free to contact me or comment below with any thoughts.
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