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Buying a Home - Dealing With Lender Letters
Most people who set out to buy a home, be it house, townhouse, condo, apartment, or mansion on a hill, know they need to have a lender letter in hand saying they are qualified for a loan. What most "civilians" (people not in the real estate business) don't realize is how much the value of a lender letter varies. Let's look at some of the general ways a lender letter varies, which sort you want, and how to present it to a seller to put you in the best possible position to buy that seller's property. If you're working with a broker, he or she will coach you in these matters. If you're shopping on your own, and especially if you're looking at FSBOs (for sale by owner properties), you need to know this stuff. Lender letters come in two general types, pre-qualification letters and pre-approval letters. The bold print on the page may call it one thing, and when the letter is read, it actually proves to be the other, so pay attention. A pre-qualification letter is weaker than a pre-approval letter. Pre-Qualification Letter The weakest pre-qualification letter basically says that "if everything the borrower has told me is correct, he/she is eligible to borrow $XXXXXX." All you really have here is the buyer's word paraphrased by a lender. Unfortunately, there is an old adage in real estate that "buyers are liars". This is well known, so presenting this type of a letter tells a seller you are not in a very strong position with the lender. A stronger version says "I have looked at an 'in file' credit report, and based on that and what the borrower has told me, he/she is eligible to borrow $XXXXXX." This is still not great, but it is a step in the right direction. Pre-Approval Letter The pre-approval letter says "I have checked this person's credit reports, seen all necessary substantiating materials relative to income?assets?etc., and my firm is committed to making a loan subject only to receiving a copy of a contract to purchase and the property's appraisal for the contract price or higher." The letter may not say it, but it is also subject to the underwriting process that includes looking at updated credit information. Regardless, this letter carries a lot of power and sellers will be very happy to see you. A Word to the Wise The above discussion of lender letters brings up something you should be keenly aware of as a buyer. Your credit must not change in any substantial way between the time you first apply for a loan and the time you go to settlement on your new home. If you're buying waterfront property, do not go out and buy a boat until after you've closed on the property. I once saw someone make this mistake and almost lose the property purchase because of it. He had to quickly find a new lender and accept a higher interest rate to keep the deal from going south. If you're moving from a small condo to a larger place, there's the temptation to run right out and buy more furniture for your new quarters. Fine. Just wait until after you're the proud new owner. If you are serious about buying a home, a lender letter is a key part of your negotiating ammunition. To save yourself a lot of aggravation during escrow, get a pre-approval letter before you go house hunting. Raynor James is with http://www.fsboamerica.org - providing homes for sale by owner, "FSBO", properties. Are you thinking, "Should I sell my home?" Visit http://www.fsboamerica.org/seller.cfm to sell your home sale for free for one month.
MORE RESOURCES: Real estate transactions top $4M for Jan. 9-15 Steamboat Pilot & Today Aspen Real Estate Snapshot Jan. 20, 2025 Aspen Daily News Real Estate Transactions, Jan. 20 edition Hopkinton Independent These 8 charts show what bubble-spotter Ivy Zelman thinks will happen in the US real-estate market after the least affordable year since 1984 Business Insider Barron Trump business partner clarifies future of luxury real estate venture: 'Will not be relaunched' Fox Business The U.S. Government Has a Landlord, and Trump Isn’t a Fan The Wall Street Journal New report predicts rough 2025 for Las Vegas Valley residential real estate Las Vegas Review-Journal RioCan Real Estate Investment Trust Announces Offering of $550 Million of Senior Unsecured Debentures Business Wire Barron Trump following in dad Donald's footsteps as he prepares to launch luxury real estate venture Hindustan Times In addition to its new Delano office, this firm is now opening on the west side, too - Wichita Eagle Decoded: The ‘behind-the-scenes demands’ over Clear Cooperation Real Estate News Real Estate Transactions | 1-15-25 The Republic-Times The Next Big Thing: Market Trends 2025 to explore the future of Southwest Florida’s real estate market on March 20 Priority Marketing Real Estate Property Sales filed filed Jan. 8-12, 2025 Fauquier Times Accurately analyzing the local real estate market Bitterroot Star Barron Trump reportedly following in father's footsteps, launching his own luxury real estate venture Fox Business Anywhere Real Estate’s Charlotte Simonelli on navigating 2025 with financial discipline and the help of AI HousingWire Kirkley offers 2024 DeSoto County real estate market trends and 2025 outlook DeSoto County News Canadian Real Estate Firm Opens Devenir Construction to Local Self-Storage Developers, Owners Inside Self-Storage Enterprise Community Development Names Zachary Marks as EVP, Head of Real Estate Development citybiz APCO's Camarco Handles Bain's Real Estate Deal O'Dwyer's PR News How Northeastern students are redefining real estate with purpose and perspective The Huntington News Brown & Riding names Lally real estate practice leader Re-Insurance.com Revolve Real Estate, for all your real estate needs PAHomePage.com FINE PRINT Real Estate Brown County Democrat Chicago real estate brokers accused of discriminating against housing voucher holders Crain's Chicago Business Central Texas real estate agent shares insight on the 4,000+ homes sold in Bell County in 2024 25 News KXXV and KRHD Real Estate Transfers Fairburyjournalnews Radio Real Estate 1/18/25 My Bellingham Now Energy Value: A New Imperative in Assessing C&I Real Estate Microgrid Knowledge Americans Can Easily Buy Real Estate in These 8 Countries House Beautiful A horse-lover's haven in Middleburgh - Real Estate Roundup The Daily Gazette Barron Trump launches real estate company as father Donald reclaims US presidency The Times of India Texas Permanent School Fund adds to $250m real estate IPE Real Assets Drake Lists Beverly Hills Estate for $250K a Month While Expanding Luxury Real Estate Empire The Source Magazine Real estate transactions recorded from January 0-13 Americus Times-Recorder Redfin Welcomes December Agent Hires Redfin News January 14-16 Gulfport Real Estate Sales The Gabber Newspaper West coast real estate firm acquires first Valley property in Tempe Daily Independent LA fires spark a call for real estate ‘unity’ Real Estate News Hernandez Development, XSITE Real Estate close on site for future Deer Park self-storage facility REjournals.com These Trump executive orders could impact real estate The Real Deal Undercover sting exposes rampant housing discrimination across Chicago area, watchdog group says WBEZ Chicago Lange Real Estate expands residential development with new teams, office The Business Journals Pinellas Beaches Real Estate January 14-17 The Gabber Newspaper Barron Trump's luxury real estate business 'teased with five word statement' from friend The Mirror US Inside the Gaza Deal: How a New York Real Estate Developer Took on Netanyahu and Hamas The Wall Street Journal 10 Years In Prison For Former Real-Estate Attorney Jersey Shore Online 'It's going to hurt': Real estate expert discusses how Trump's deportation plans could affect housing Yahoo Finance Bill Ackman Offers $1B For Real Estate Giant Howard Hughes To Emulate Berkshire Hathaway Yahoo Finance Resilient California Housing Market Defies Challenges in 2024 Norada Real Estate Investments Barron Tower? Trump’s Youngest Son Follows Father’s Footsteps, Set To Relaunch Real Estate Company Hindustan Times Top Real Estate Agent in Kirkland, WA, Honored for Advocacy and Leadership at Annual Realtors Gala openPR How the Fires Will SEVERELY Impact L.A. Real Estate, According to Celebrity Agents - House Beautiful NexPoint Diversified Real Estate Trust Completes $95 Million Refinancing of Marriot Dallas Uptown The Eastern Progress Online FGE says no protection for Dispossession Cartel that illegally seize real estate - Riviera Maya News 6 Sacramento-area real estate projects to watch in 2025 - Sacramento Business Journal The Business Journals |
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