MORTGAGE MATTERS

3 min read

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Jul 2022

Navigating Your Pre-Approval Letter 

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WHAT YOU'LL LEARN

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How does a pre-approval letter help you?

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What’s the difference between pre-qualification and pre-approval?

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What should I look for in the pre-approval letter?

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WHAT YOU'LL LEARN

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How does a pre-approval letter help you?

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What’s the difference between pre-qualification and pre-approval?

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What should I look for in the pre-approval letter?

You’re ready to look for homes, and you really want an advantage over the competition. Sellers prioritize buyers who have proof they can afford the home, are financially reliable, and are ready to move forward. The pre-approval letter demonstrates all of these qualities—lifting your offer to the top of the list.

What About Pre-Qualification? 

Pre-qualification is based on the verbal answers you provide to a lender, even without submitting an application. It gives you an estimate of the loan amount you can afford.

Pre-approval has more power behind it. It means you met with us to discuss your options, submitted an application, consented to having your credit report pulled, and provided financial documents, such as:

  • Employment verification (W2's or 1099’s)

  • Bank statements

  • Retirement and brokerage account statements

  • Other assets

  • Current real estate debt or rental statements

  • Monthly debt payments (student loans, auto loans)

  • Court orders (divorce, child support, alimony, etc.)

  • Tax returns

The result is written validation that you’re a great candidate for a home in your particular price range. Pre-approval also helps determine which loan program, such as Conventional or FHA, best suits your needs.

Upfront Underwriting 

One way Atlantic Bay takes pre-approval a step further is with upfront underwriting.

Sometimes called “conditional approval,” upfront underwriting means your file goes to an underwriter at the beginning of the loan process, instead of at the end, as is the case with many lenders. The underwriter will thoroughly review your financial picture and, listing certain conditions you must meet before closing, provide you with the exact loan amount you can afford.

Atlantic Bay’s To-Be-Determined Underwriting process, or TBD, gives you a conditional approval for precisely how much you can afford, even before you have a property address in mind. It’s the next best thing to a cash offer.

What’s in the Letter? 

Once pre-approved, your letter (which you can print or access on your mobile device with Atlantic Bay’s user-friendly technology,) will include several important numbers:

Purchase Price: This is the highest home price, set by the seller, that you can shop for with the lender’s blessing. It’s not necessarily the final loan amount, nor do you have to meet this price—you can buy a lower-priced home if you like! This number is simply how high you can go in your search.

That said, if you find your dream home, and it’s a few thousand dollars more than your pre-approval allows, you can always talk to us about other paths for covering that extra cost.

Loan Amount (up to): This number is the actual loan amount you will be responsible for after the down payment. Again, your final loan amount will probably be different—this is just the highest amount the lender is willing to lend.

Down Payment: This is the cash you have demonstrated that you can bring up front to closing. (Need help getting the funds? Try these tips.)

Your letter—typically good for 30 days—will go on to explain that your pre-approval is not a guarantee of a loan just yet and, and it will list other “conditions” that need to be met before closing, such as appraisal and clear title. But the letter is a huge step forward in your homebuying journey.

Finally, the letter will remind you not to make any financial decisions that could affect your credit during the home loan process, like taking out new credit cards, making any late payments, co-signing someone else’s loan, or spending your savings on a large purchase.

Get Going with Your Pre-Approval 

It’s never too soon to start learning how you can buy a home. Even if you’re unsure, or don’t have all the aforementioned paperwork handy, that’s OK. The first step is meeting with us and talking about your homeownership dreams. Then, if you’re comfortable, you can begin the approval process and hopefully soon have that letter in hand!