Winning the Bidding War: The Power of a Pre-Approval Letter
In Northern California's bustling real estate market where listings are usually on the market for just a few weeks, standing out in the crowd of other buyers is critical. One tool that can elevate your offer in a bidding war is a mortgage pre-approval letter. Understanding what a pre-approval letter is and why sellers and their agents look to it first when entertaining offers, could be your golden ticket to securing your dream home amidst fierce competition. Below, you’ll learn why having a pre-approval letter can give you an edge in a competitive market.
What is a Pre-Approval Letter?
A mortgage pre-approval letter is a document from a lender indicating you have been preliminarily approved for a loan up to a certain amount, based on an initial assessment of your creditworthiness and financial situation. This letter tells sellers that you are not only a serious buyer but also have the financial means to back up your offer. If possible, try to get a pre-approval with a soft credit pull so that your credit score and report aren’t dinged when shopping for a home. It's important to note that a pre-approval is not the same thing as a pre-qualification. It’s more comprehensive and offers a stronger testament to your financial stability in the eyes of sellers in comparison to a pre-qual.
Why Do Sellers Prefer Buyers with Pre-Approval Letters?
Financial Credibility: In our fast-paced market, a pre-approval letter serves as a badge of financial credibility, assuring sellers that you have undergone a lender’s scrutiny successfully and will be funded a home once you put in an offer and everything else checks off. A pre-approval letter makes your offer more attractive, potentially giving you the edge in a multiple-bid situation.
Faster Closing: Sellers keen on a swift transaction are more likely to favor buyers with a pre-approval, as much of the financial groundwork has already been laid.
Strength in Negotiation: When multiple offers are on the table, which is often the case here in NorCal’s competitive market, buyers backed by a pre-approval letter are viewed as more serious and committed. This perceived reliability can make your offer stand out, even if it’s not the highest bid.
Seller Peace of Mind: Given the quick turnaround of properties in the region, sellers are naturally inclined towards transactions that promise minimal fuss. A pre-approval letter signals your commitment and readiness, providing the seller with peace of mind and making your offer more appealing.Due to our fiduciary duty, mortgage brokers provide impartial advice focused solely on the client's best interests. We evaluate various loan options objectively, considering factors such as affordability, long-term financial impact, and risk management. This transparency empowers borrowers to make informed decisions that align with their financial objectives. On the other hand, while lenders offer guidance throughout the loan process, their recommendations may be influenced by internal policies or incentives tied to promoting specific loan products or services.
Get a Pre-Approval Letter BEFORE Shopping for a Home
By getting a pre-approval letter before you go to any open houses or ask your real estate agent to take you on a tour of any of your favorite homes you may have spotted online, you save both yourself, your agent, and the sellers of these homes time and energy. By knowing exactly how much money you have to spend (your pre-approval will tell you your highest loan amount), you’ll stay within your budget and won’t set your heart on anything you may not be able to afford.
A Good Mortgage Broker (like Brizzi) Will Call The Listing Agent for You
A good mortgage broker can reach out to the agents of the home(s) you’re interested in and cross-sell your offer along with the agent. By doing this, the listing agent can rest assured that you are a serious buyer, ready to make the purchase, and can meet the closing times.
In a busy market with plenty of cash buyers to compete with, a pre-approval letter can be your saving grace. It lets the sellers know you are interested, you’re financially responsible, you’re in the right position, and ready to go.
Want to see some loan options and discuss what can work for your financial plan? Get in touch.