What should a preapproval letter contain?

There are a few things that every preapproval letter should contain. The main thing that every preapproval letter should contain is the LOAN AMOUNT. This will let you know how big of a home you should be shopping for. Remember that this number is just a guideline for yourself, you need to feel comfortable with the payments of this loan in the long run. Do not allow your realtor to talk you into purchasing a home that is just a little bit more than what you feel comfortable with, unless the realtor plans on sharing the payments with you.

The Pre-Approval Letter should contain the loan program you have been approved for. There should also be conditions unique to the loan program you need to satisfy prior to final loan approval. Some of the more common conditions on a Pre-Approval are the requirements for property appraisal, copy of downpayment check, rental history verification, most recent bank statements, etc.

Your pre-approval letter should give a basic outline of the terms of your financing. Every nook and cranny of how you will qualify for the loan is not needed.

Your preapproval letter will naturally need to be dated and possibly state when the preapproval will expire. If the letter is more than thirty days old the seller or real estate agent may ask that the letter be updated.

Your letter will typically state that the home must appraise for at least the selling price and that clear title can transfer to the new owners.

If you are preparing to purchase a property in Texas there is a specific pre-qualification and pre-approval letter that is mandated by the state. Be sure that your lender prepares the correct letter.

The pre approval letter is just that a pre approval and not a guarantee to lend. Once the loan file is in underwriting at the lender your ability to borrow and the amount you may borrow may change. To avoid this type of situation always provide your mortgage broker with as much accurate information as possible.

Here is a sample prequal letter
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To: Tony Larrabee

Borrowers: Ms. Sabina Yeasmin, Mohammad Mannan
Escrow #: TBD
Property: 871 N Turner Ave, Ontario, CA
Loan Type: Conventional Financing

The above-mentioned buyer(s) has applied for a home loan and has been approved through Desi Realty Estates and Mortgage Services. This approval is based on a completed Uniform Residential Loan Application and verification of income and credit. This loan approval is based on a sales price of $390,000.00.

Conditions prior to loan documents are:
1. Satisfactory appraisal report to support sales price
2. Estimate HUD 1 reflecting all closing cost
3. Lock-in interest rate and finalize loan amount
4. Escrow instructions and final vesting
5. Fully executed purchase and counter offer, if any
6. Preliminary title report

Funding conditions also apply, but are technical in nature such as termite clearance, proof of insurance, executed loan documents, etc.
Credit documentation may be provided as part of our approval process. Please inform us of any adverse changes in the terms of the purchase transaction.

Please do not hesitate to contact us at our office or by cellular/voicemail (909) 437-8887 with any questions. We look forward to servicing your future real estate financing needs and the needs of your clients.

Thank you,

Prakash Bhakta
Broker, MBA
CA DRE # 01318490

15611 North Peak Lane, Fontana, CA 92336
Telephone (909) 437-8887 . Facsimile (909) 568-2422

When you get your pre-approval letter also ask your mortgage broker for a copy of a Good Faith Estimate (GFE) so you can get an idea of what to expect for closing costs. There are some fees that will depend on what the purchase price actually is for the house you eventually buy. However this will give you and the real estate agent at least an estimate of that broker's fees.

Most Real Estate Agents or Buyer's Agents will not work with you until you have a Pre-Approval Letter.

A Pre-Approval may also include interest rate, and payment information for the loan ammount you are approved for. In most cases your interest rate will be a floating rate and subject to change with out notice.

Your Pre-Approval letter should also contain the contact information for your mortgage broker. This is to ensure that it is a legitimate Pre-Approval, and also to allow your real estate agent to verify the same.

If the loan program you are approved for allows for a seller assist, this should be mentioned in the pre-approval letter. Various programs allow different seller assist amounts. Your real estate agent should be aware of the seller assist amount you are allowed. This way, they know to negotiate this into the sales agreement.

For more information regarding this topic, please call Mike Williams at 516-921-9000 or email mwilliams@northshorefunding.com.