Mortgage Pre-Approval Letter | Sample and Template

Mortgage Pre-Approval Letter (Word Template)

Buying a home is a major step and usually involves several financial considerations, the most important of which is a mortgage. As you shop around for property to purchase, you should also work on getting pre-approved for a mortgage. A pre-approval gives you an edge over the other homebuyers and clarifies the amount of money you can access for the purchase. If you are considering buying a home, read on to learn what mortgage pre-approval means and why you need a mortgage pre-approval letter.

What Is a Mortgage Pre-Approval Letter?

A mortgage pre-approval letter is a formal certification provided by a financial institution as a guarantee for loan approval. Potential homebuyers use this document to prove to a settler that they can meet the selling price requirement and should be considered serious buyers. In some cases, real estate sellers require that potential buyers present a pre-approval letter before viewing the property.

Tip: Always cross out your maximum borrowing amount on the pre-approval letter before presenting it to a seller or real estate agent. Doing this will protect your negotiating power.

Mortgage Pre-Approval Letter (Word Template)



    Essential Elements

    A mortgage pre-approval letter is designed to show that you qualify and could get a loan of a given amount from a financial institution. To do this, it usually highlights the following details:

    • The date of the pre-approval
    • The financial institution’s name.
    • Your full name, Social Security number (SSN), date of birth, and contact information.
    • A description of the loan product for which you qualify, including loan amount, repayment time, interest rate, and borrowing terms.
    • The conditions you must meet for final loan approval
    • The property’s purchase price
    • The property address
    • A statement indicating that the pre-approval is not a commitment to lend from the institution or an obligation to borrow on your part.
    • The signature and name of the approving party, usually the institution’s manager.

    How to Get a Pre-Approval Letter

    It is important to remember that getting pre-approved for a mortgage does not signify a commitment by the financial institution to lend you the stated amount. It is also not an obligation on your part, and you can borrow from another lender. Generally, this document proves that you have good credit and can get financing to close on a property. Here is how to get it:

    Step 1: Provide an Estimate of What You Need

    Shop around for the home you wish to purchase and find out its selling price. Next, check your finances and determine how much funding you need to close on the property. The estimate you place in your request should be slightly higher than this amount.

    Step 2: Present Personal Details

    With a dollar amount in place as your estimate, provide the lender with the following personal details:

    • Your current credit score and a copy of your credit report for verification.
    • Pay stubs for the last 6 months or W-2 OR 1099 tax returns as income verification
    • Government-issued ID, e.g., your passport or driver’s license
    • A letter from your current employer verifying your employment status
    • Proof of assets documents like copies of stock portfolios or bank statements

    Step 3: Send in Your Application

    Attach all the documents mentioned in step 2 to your application and visit a mortgage lender, credit union, or local bank to complete the process.

    Step 4: Wait for a Response

    The financial institution will likely get back to you within 24 to 72 hours of receiving your application. Once your request is processed, you might receive a signed letter indicating the available borrow amount and loan terms. This is your mortgage pre-approval letter

    Sample Mortgage Pre-Approval Letter

    August 1, 2031

    From: Reuters Credit Union

    321 Highway Street

    Atlanta, GA 31902

    Re: Mortgage Pre-Approval

    Dear Daniel Colin,

    We have reviewed the message you presented in your application and are pleased to inform you that you have been pre-approved for a residential property mortgage loan. The loan details are as follows:

    Type: Residential Home Mortgage

    Property Address: 123 Rose Field, Atlanta, GA, 23100

    Property Selling Price: $950,000

    Loan Amount: $800,000

    Loan Terms: 25-year, conventional

    The final loan approval will be obtained upon meeting the following conditions:

    • Marketable property title
    • Acceptable purchase agreement
    • Full property appraisal

    Please note that this pre-approval does not negate the need for official underwriting for funding approval. It also does not signify a commitment to lend from Reuters Credit Union and does not obligate you to obtain a loan from us.

    Sincerely,

    Mary Finch, Loan Officer

    Reuters Credit Union


    Pre-Qualification Vs. Pre-Approval

    As a potential homeowner, you may have come across the terms’ pre-approved and ‘pre-qualified.’ What do they mean, and how might they help you own a home?

    • Mortgage Pre-qualification

    Pre-qualifying for a mortgage loan means receiving an estimate of the amount you could borrow depending on an analysis of your finances and credit score. It is a chance to find out what mortgage options meet your current needs.

    • Mortgage Pre-approval

    While mortgage pre-qualification is among the first steps in buying a home, a pre-approval often comes after you know the home you want and how much you need. Generally, it is a way to confirm your creditworthiness and involves sending an application to a lender and receiving a pre-approval letter.

    Required Information

    To get pre-qualified or pre-approved for a mortgage, you will need to provide the following details:

    Pre-qualification

    • Credit report
    • Income verification
    • Bank account details

    Pre-approval

    • Income verification for the last 30 days (pay stub copies)
    • Copies of W-2 tax return forms from the past two years
    • Bank account details
    • Two recent bank statements
    • Credit report
    • An estimated mortgage amount

    Duration

    Pre-qualifying and getting pre-approved for a mortgage are also different in how long their processes take. For example, the Bank of America can process online pre-qualification applications within an hour, while a pre-approval letter could take 10 days to be processed.

    Which One Should You Choose?

    If you are a first-time homebuyer, you should get pre-qualified first and formulate a budget from the information you receive. However, if you are ready to make an offer, you should get a pre-approval letter to help you stand out from the competition as a serious, creditworthy buyer.

    Frequently Asked Questions

    When to get a mortgage pre-approval?

    A mortgage pre-approval letter is usually valid for 60 to 90 days. If you already have a home in mind, you should get one right before you make an offer on it. If you are still searching, it is advisable to get the letter six months early so you can improve your credit score.

    What documentation do you need to get a mortgage pre-approval?

    A lender will request certain documents when considering your pre-approval application. These include:

    Bank statements for up to the last 6o days
    W-2 tax return forms for the last 2 years
    Pay stubs for the last 30 days
    Proof of assets documents
    Schedule K-1 (Form 1065) (self-employed applicants)
    Income tax return forms
    An employment verification letter from your employer
    Government-issued ID

    How long does it take to get a mortgage pre-approval letter?

    Some financial institutions process pre-approval letters within hours if the application is made online. Others could take several days, depending on the complexity of your financial information.

    Does pre-approval mean you get the mortgage?

    Not really. When a lender gives you a pre-approval, they are not committing to lending you money. They could refuse to process a final approval of your financial status changes before underwriting.

    Can you get denied after pre-approval?

    Yes. A pre-approval letter works on the assumption that the information you have provided in your application is factual. If you are found to have lied or failed to disclose some information, the lender could deny your mortgage application.

    Key Points

    Many sellers want to see a mortgage pre-approval letter as proof that you are a serious and capable buyer. Even if they don’t ask for it immediately, having one can work in your favor by confirming your borrowing ability and setting you apart from the competition. All you need to do is send an application to a lender and some financial documents and wait for the pre-approval letter.

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