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Do you need a pre-approval letter to make an offer?

Posted by Linda Shaughnessy on Monday, March 23rd, 2020 at 10:30am.

While you are not required to provide a mortgage pre-approval letter in order to make an offer on a property, it vastly improves your chances of having your offer accepted. This is because a pre-approval assures the sellers and their broker that you are serious about buying their home, financially qualified to buy their home, and that there will not be extensive delays to closing since you have already begun the process of working with a lender.


When you think about buying a new home, you probably think about square footage, fixtures and finishes, along with the right neighborhood or local schools. However, one of the most important things to consider early in the process is your mortgage application. When should you apply for a mortgage pre-approval and how does the process work?

 We have the answers to your most burning questions. Keep in mind, every loan approval and home purchase is different and your specific situation can affect timelines and processes.

What is the difference between pre-approval and pre-qualification?

While many people use the terms mortgage pre-approval and pre-qualification interchangeably, they are, in fact, distinctly different processes. While pre-qualification may provide some helpful preliminary information, pre-approval is far more useful throughout your home search process.

Mortgage pre-qualification can be done quickly over the phone. It is based on a brief conversation where your lender will ask a few questions about your income, assets, debt, and overall financial picture. This will allow the lender to give you a ballpark figure for your home search, a professional guesstimate of how much home you can afford.

 Mortgage pre-approval goes further and is potentially much more helpful. Pre-approval involves the lender pulling your credit report, with your permission, in order to give a much more accurate and thorough picture of the loan amount for which you could potentially be approved.

Because pre-approval offers you more information and a more solid sense of your potential loan amount, it pays to get your pre-approval early in the home search process.

How does mortgage pre-approval affect my credit score?

There are two types of credit inquiries -- “soft” and “hard.” A soft credit inquiry is the kind that an employer might make in order to determine whether or not you are qualified for employment. A hard credit inquiry is attached to an application for credit or a loan.

 However, the mortgage pre-approval process falls somewhere between these two types of inquiries. While it is attached to a loan application -- and is thus a hard inquiry -- pre-approvals are lumped together as part of the same loan process. That means that you can apply for multiple pre-approvals within a 14-day period with only a single five-point impact on your credit score.

Can I be pre-approved by multiple lenders?

You can be pre-approved by multiple lenders, and it pays to shop around. Mortgage pre-approval allows you to:

  •        Compare interest rates, fees, and requirements for a variety of lenders
  •        Evaluate the pros and cons of a variety of loan products
  •        Determine which company’s customer service is best.

Comparisons among three different lenders may yield some interesting results. Beyond that, the law of diminishing returns takes hold and you will probably not see much difference.

What do I need to provide for a pre-approval?

Most of the documents you need for pre-approval will subsequently be used during the mortgage underwriting process. These include:

  •        Social Security Card and Driver’s License for each borrower
  •        Proof of employment
  •        Proof of income
  •        Self-employment income information
  •        Tax documentation
  •        Place of residence
  •        Bank account information
  •        Debt information

 If some of your funds will come from gifts, you will be required to supply letters from the gift-givers to verify the funds. This is important in order to ensure that you will not be expected to repay the money.

What will a pre-approval letter include?

Your lender will generate an initial pre-approval, then will create a specific letter to accompany your subsequent offer. The pre-approval letter will normally be printed on the lender’s letterhead, and will include:

  •       Borrower name(s)
  •       Lender information
  •       Maximum loan amount or purchase price
  •       Interest rate
  •       Repayment details
  •       Property type

If you are applying for a specific loan program, this information may be included as well as the down payment amount, if available.

How long does pre-approval take?

Some lenders may take several days to process your documents and provide you with a pre-approval. Others may use online resources that shrink the pre-approval process to just a few minutes. Once the initial pre-approval has been created, you should be able to get a subsequent, property-specific pre-approval letter relatively quickly.

How long does pre-approval last?

Pre-approval is generally good for about three months. However, keep in mind that significant changes to your credit score or to the loan requirements may mean a change in some of the specifics of your eventual loan and even of your approval status. Once you’ve been pre-approved,

  •        Don’t make new, major purchases, especially on your credit card
  •        Don’t take out additional new loans
  •        Don’t quit your job
  •        Don’t change banks or open new accounts
  •        Don’t close out existing credit card accounts
  •        Don’t make large withdrawals or deposits that you can’t account for.

 Looking to begin the pre-approval process? Your real estate broker offers an extensive network of lenders and other professionals to assist you throughout your home search and purchase. Let’s discuss your particular needs and your financial information in order to find the right lender for you

                                                                                                              What credit score do you need to buy a house ~ Read More



Jameson Sotheby’s International Realty

55 E Erie Street  1C

Chicago, IL 60611                   


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