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I've been reading up on pre-approval letters and see that there are two schools of thought on what they should/shouldn't say.
One group says to put the full amount you qualify for even if it's well over the amount you'd need to borrow. The thinking here is that these days, seeing that a buyer is solid financially will sweeten the pot.
The other group says keep the amount on the letter as close to your ultimate loan amount as possible. The thinking here is that if sellers see you can afford more, they'll be less willing to negotiate.
It's no big deal to have your lender email you a letter with the actual amounts involved in the deal. I used to do that but these days I don't think it matters as much. Just because you can borrow up to x amount doesn't mean that you think the property in question is worth that much. In fact, your agent can tell the other agent that, because you are approved for more and there's lots of inventory out there, YOU aren't as likely to negotiate.
I don;t think the Seller's agent needs to know the exact amount of the pre-approval as long as you give the lender permission to tell them that you are solidly qualifed to purchase the house upon which you have made an offer. If the Seller wants a copy of the letter have the lender make it specific to the property, for the contract amount, after the offer has been accepted by the Seller.
To me a solid buyer puts down more in earnest $$ and shows on their financing addendum that they are putting down a 20% or larger downpayment. I think those carry more weight with a Seller than a pre-qual. letter prior to all the paperwork on the loan and property having been completed. That's just my opinion and what I used to tell my Sellers and Buyers when I was an active Realtor, YMMV.
It only takes a few minutes to get a letter from a lender that reflects the offer. I generally do not recommend that any approval letter exceeds the offer amount by much, if any.
In today's market, not offering the pre-approval letter with the offer is not going to get you too far. You can't say what was suggested above about getting it for the seller once they execute a contract. That's ridiculous. A seller wants to know if a buyer can play the game before they sign the dotted line.
As for the amount, I don't think you should put the actual approval amount. It also doesn't have to be specific to the actual property, but it should be a number around the amount you offered. If you're approved for $200k and you're writing on a $175k, no reason to let them know you can go to $200k.
In today's market, not offering the pre-approval letter with the offer is not going to get you too far. You can't say what was suggested above about getting it for the seller once they execute a contract. That's ridiculous. A seller wants to know if a buyer can play the game before they sign the dotted line.
You might think that would be the case, but it isn't.
My house is on the market. We got an offer last week. It was a good offer, considering the abysmal state of the market here. It had the standard contingencies but no pre-approval. I asked my agent to request one. It took 2 days, but we finally got it.
I don't even like to show houses unless they have already talked to a lender and at least gotten a good idea of how much the can qualify for, let alone submit an offer without a pre-approval letter!
You might think that would be the case, but it isn't.
My house is on the market. We got an offer last week. It was a good offer, considering the abysmal state of the market here. It had the standard contingencies but no pre-approval. I asked my agent to request one. It took 2 days, but we finally got it.
Taking two days to get a pre-approval letter is going to show you from the beginning how things will probably go from here on out. If a lender is that slow on basic communication, are you going to close on time?
I am more inclined to think the lag is on the part of the agents. You agents here on this forum are a rare breed. Regular agents that we have to deal with in the real world......
As an example, we had 4 showings. 4 times my house was left unlocked. After the first time I left a large note in a highly visible place. Came home after the second showing and the back door was not even closed. A/C cranking away and some idiot of an agent did not close the door!
If it's a matter of no letter vs. a letter over-stating your qualification, the letter wins. However, I am pretty easy to reach and I have yet to have a client miss an offer because they couldn't reach me. Most people know they are going to write well in advance before the contract is drawn up. I usually have a real good idea anyway, because I've run the closing costs two or three different ways. If there's a counter and an update is needed, that's also available pretty quick.
If I am working with a buyer that was not referred by the Realtor, I always will ask the borrower's permission to contact their agent and introduce myself. With so many loans falling out, it's important that the agent and the borrower feel comfortable contacting me with questions on guidelines or guidelines specific to my bank. (My tag line is "if you're working this weekend, so am I").
In our area, we are back to feast or famine........no contracts or multiple offers, all or nothing. The letter with the known lender usually wins, even if it's not the highest offer.
But I don't believe in showing your full hand. Let's say you offer 280K, but your letter states 300K. (and your letter states 4.5% and your contract states 4%), and, it's accepted. Your home inspection reveals the HVAC is rather weak, it may last this year, but iffy for a couple of years. Your seller has already been tipped off you could probably afford the repairs....(Now, whether they would take the chance of losing you, who knows?) In their head, you're Moneybags. And then let's say during walk thru, there was something minor, like a paddle or two broke off a ceiling fan.....are they going to balk? Do you even want that perception? (And whatever you do, do not reveal the appraised value to the seller or their agent unless it's low! Never, never, ever!. Once the seller finds out you got the home under value, they won't give on anything).
If you feel comfortable with your loan officer's access, opt for the specific letter. Otherwise, grab the generic letter that is over your offer price.......it's better than nothing.
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