What is a Pre-Approval Letter?
A pre-approval letter certifies that a borrower has been prequalified and approved for a mortgage. It is NOT a commitment by the financial institution. Although, the letter is a preliminary assessment that the borrower has sound credit and the funds available to obtain a mortgage and close on a property.
What is Included?
- Property Purchase Price;
- Loan Amount;
- Loan Term; and
- Loan Type.
How to Get a Pre-Approval Letter (4 steps)
1. Estimate Your Needs ($)
When applying for a pre-approval letter, the applicant will need to know their financial needs for closing on a home. This means entering how much the borrower is looking to borrow to buy the house they want. When doing this, it’s best to request a little more than the sales price in case of a multiple offer situation.
2. Gather Personal Info
A lender will usually request the following personal information:
- Income Verification – Through either tax returns (W-2 or 1099) or pay stubs;
- Credit Score – A credit check will be run. A minimum score is usually around 620 to be approved for a conventional loan;
- Employment Verification – A letter from an employer or manager may be required;
- Government ID – Some form of identification in the form of a driver’s license or passport; and
- Proof of Assets – Screenshots of bank statements, stock portfolios, or other hard assets showing the buyer has the funds to close on the property.
Sample
Download: PDF, MS Word, OpenDocument