Mortgage pre-approvals

2 Replies

Originally posted by @Jonathan Baker :

This is one thing that still confuse me. What is the need of a mortgage pre-approval? I have a cousin who bought a new house recently by taking a mortgage. She had taken pre approval mortgages and she said that it makes things easier for us. How is it so? What is the exact reason one wants to take a pre-approved mortgage?

 They tend to take your offer more seriously if you have a pre-approval letter. Some home buyers will put an offer on a home, then go and try to get financing only to find out that they can't. This wastes the time of a seller. If the seller knows that you already have been approved for a loan in the amount of the sale price of a home, they might be more inclined to accept the offer, versus a higher offer with no pre-approval letter.

@Jonathan Baker  A pre-approval tells the seller that a mortgage banker has looked at the numbers and believes that the individual's loan application would be approved when it goes through underwriting. This is certainly better then an offer that does not have a pre-approval letter.

Even better is a Fully Approved loan. In this scenario, the loan application goes through underwriting and is approved upto $xx and x.xx%. The property address is TBD, and the only contingency is a clean property title and appraisal above the loan amount. An offer with a Fully Approved loan letter is very very strong. It tells the seller that the loan is already approved.

Hope this provides clarification. Please let me know if there are questions.

Upen Patel
Mortgage Banker