Do I Need a Pre-Approval Letter to Make an Offer?

Do I Need a Pre-Approval Letter to Make an Offer?

At the end of the day, you don’t necessarily NEED a pre-approval letter to make an offer on a piece of property.  But nowadays, with so few properties on the market, and so many multiple-bid situations, it’s often a requirement just to hear back.

Sure, you can tell your real estate agent to tell the listing agent that you’ve got an 800 credit score, $1 million in the bank, and a job that pays you $500,000 a year. And they might say fine, skip the pre-approval.

But chances are that’s not your financial profile, so just to play ball and keep everyone happy, it often makes sense to get the pre-approval done. It will also strengthen your offer.

And as I alluded to earlier in this post, it’s good to know where you stand as well.  You might think you’re a sure shot at getting a mortgage, but surprises aren’t all that uncommon and mortgage guidelines change all the time.

So a pre-approval could actually save you time and money, despite being a task that needs to be taken care of upfront.  It shouldn’t take very much work to get one anyways.

Just remember not to feel obligated to use the bank that furnishes the pre-approval letter for you!

 For more information about loans or this subject please contact us via email atinfo@nuhomegroup.com or give us a call at 713-373-0345

NuHome Group 713-373-0345

1445 North Loop West Suite 105 Houston, TX 77008

Frank Marta NMLS# 245813/835196

What Is A Pre-Approval?

A pre-approval is a written, conditional commitment from a bank or a mortgage lender that says you are pre-approved for the mortgage financing in question.

It comes only after filling out a loan application, supplying verified income, asset, and employment documentation (assuming these items are necessary), running credit, and underwriting the loan file.

Acquiring a pre-approval shows the interested parties (sellers, agents) that you’re a committed buyer, boosting your chances of sealing the deal at the price you want. It will also show you how much house you can afford, not just an estimate.

Pre-Approval Requirements:

• Credit report
• Bank statements
• Pay stubs
• Tax returns

Once you provide all the required documentation and get the pre-approval letter from a bank or lender, it is typically valid for 60-90 days. Just note that things can change during that time, such as your credit score, so it’s not 100% guaranteed.

As you can see, being pre-approved and pre-qualified are not the same thing, so make sure you know the difference before shopping for a home.

For more information about this subject and about loan questions please contact Frank Marta Texas Home Loan Specialist. Info@nuhomegroup.com or give us a call (713) 373-0345

NuHome Group 713-373-0345

1445 North Loop West Suite 105 Houston, TX 77008

Frank Marta NMLS# 245813/835196

What Is A Pre-Qualification?

If you choose to finance the home purchase with a mortgage, you’ll need to get pre-qualified first. A “pre-qualification” isn’t as robust as a pre-approval, but it’s a good first step to ensure you can purchase the home you desire (or any one at all).

A pre-qualification is a pretty straightforward, simple check to see what you can afford based on your income/debt levels (debt-to-income ratio), assets, down payment, employment history, perceived credit score, and so on.

You can get pre-qualified very quickly and easily with a bank or mortgage broker, but it won’t carry much weight in the eyes of the agent or the seller.

After all, with a pre-qualification you’re simply supplying estimates and your credit report probably hasn't yet been run (though it should be pulled early on in the process). That said, a pre-qualification, or pre-qual, is just a determination of what you’d likely qualify for if you made an offer and applied for a home loan.

It’s not necessarily a waste of time, but it’s not going to get you very far.  You can liken it to running a few numbers to see where you stand, but it cannot be used in place of a pre-approval.

 For more information about this subject and about loan questions please contact Frank Marta Texas Home Loan Specialist. Info@nuhomegroup.com or give us a call (713) 373-0345

NuHome Group 713-373-0345
1445 North Loop West Suite 105 Houston, TX 77008
Frank Marta NMLS# 245813/835196

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NuHome Group 713-373-0345
1445 North Loop West Suite 105 Houston, TX 77008
Frank Marta NMLS# 245813/835196

How Do I Calculate My Monthly Income?

 If you’re a future home buyer, you might have used one of those “How much mortgage can I afford?” calculators online. These calculators typically gather information like your down payment amount, credit score range, monthly or annual income and debts.

Then, they’ll spit out an estimate of what a bank might lend you mortgage-wise.

These calculators work primarily by figuring out your debt-to-income ratio and then how much you can afford to pay for your monthly mortgage payment. This is similar to how banks decide how much to lend you, but first you must know what your monthly gross income is.

Yearly– Take your yearly gross pay and divide it by 12 months.

Monthly– If you are paid monthly, and then your gross pay is your gross monthly income. Pen and calculator

Semi-Monthly – Multiply your gross income by 2.

Bi-Weekly– Multiply your gross income by 26, then divide it by 12

Weekly– Multiply your gross income by 52 (weeks per year) and then divide it by 12 (months per year)

Hourly– Multiply your hourly income by the amount number of hours you work a week.  Then multiply that amount by 52 (weeks per year) and divide it by 12 (months per year)

Gross income: Your gross income is how much you make before taxes, or any other deductions are taken out.

Here is a visual Chart

NuHome Group 713-373-0345
1445 North Loop West Suite 105 Houston, TX 77008
Frank Marta NMLS# 245813/835196

What is the difference between the Listing Price and Appraisal?

When it comes to real estate, there must be a meeting of the minds for a property sale to take place. The value a buyer applies to a property can vastly differ from the value a seller or lender places upon it. The seller, the buyer and the lender must find an agreeable value to attach to a property so the sale can proceed. This can be accomplished only when the listing price and the appraised value are as close to each other as possible.

Listing Prices:

Listing prices are influenced by the real estate agent, and set by interested and often emotional sellers.

Sellers are not held by any rules when they list a home. In some cases, sellers take what they paid for the house, add what they have spent on improvements and even add amount for profit.

Often times, sellers will list their home based on the amount needed to pay for the real estate agent, closing costs and cover the amount of the mortgages.

Extra low prices are generally the result of an extra motivated seller that has to sell and move in a rush, so they’ll list their property below market comps in order to be the most competitive.

Appraised Value

          When a potential buyer goes to a lender to get a mortgage for property, the lender will take several factors into consideration when determining the property’s value. Appraisals are meant to be realistic determination of the value of a home if it were to sell in the current market, in its current condition.

The property’s neighborhood, the value of properties of similar size and construction, even such things as the type of fixtures on the premises and layout of the parking lot are considered when determining the appraised value of the property. Appraisers are also asked to look only at the comparable sales within a certain distance, usually one mile except in rural areas, and within a specified period of time, which is 3-6 months in the current market. This is the value on which a lender will determine whether to proceed with evaluating overall creditworthiness of the potential buyer.

Warning

A large gap between the appraised value and the asking price can be a problem for the buyer. If the lender thinks the appraised value of the property is not enough to cover the requested mortgage, the lender could require a larger down payment, which can be problematic for a buyer because it could require additional funds of several thousand dollars.

The Verdict:

While list price is never a good indication of what a home in your neighborhood is worth, appraisals are not an exact science that will determine the true value of your home either.

Some will argue that a home is worth what people will pay for it, so there’s obviously a little room for personal interpretation.  Either way, the bank securing that piece of real estate for a mortgage loan generally always has the final opinion that matters the most.

NuHome Group 713-373-0345

1445 North Loop West Suite 105 Houston, TX 77008

Frank Marta NMLS# 245813/835196

House Problem Signs

For more information about this subject and about loan questions please contact Frank Marta Texas Home Loan Specialist. Info@nuhomegroup.com or give us a call (713) 373-0345.

NuHome Group 713-373-0345
1445 North Loop West Suite 105 Houston, TX 77008
Frank Marta NMLS# 245813/835196

Homebuyers Check List

For more information about this subject and about loan questions please contact Frank Marta Texas Home Loan Specialist. Info@nuhomegroup.com or give us a call (713) 373-0345.

NuHome Group 713-373-0345
1445 North Loop West Suite 105 Houston, TX 77008
Frank Marta NMLS# 245813/835196