Do I Need a Pre-Qualification Letter to Buy a Home?

New Construction home being built.

Yes, you do!

A pre-qualification letter is a letter from a mortgage broker or lender which shows that they have reviewed the borrower’s financials and that they qualify for a loan up to a specific amount. A pre-qualification letter is based on information provided by the borrower and is not verified. Your Realtor can suggest a mortgage broker who has competitive rates and gives great service. A pre-qualification letter should be obtained before you go house shopping. It does little good to view homes you do not qualify to buy.
For example, two buyers are working with different Realtors. Each falls in love with the same home and submit offers which are similar in nature. One has a pre-qualification letter and the other does not. The seller will most likely accept the offer with the pre-qualification letter and reject the other buyer’s offer.
According to Tony Moore with Gulfside Mortgage Service, buyers can obtain a pre-qualification letter in as little as 30 minutes up to 24 hours, depending on the complexity of their financial situation. For example, someone who is self-employed or works on commission may take closer to 24 hours. Approximately 60-70% of borrowers obtain pre-qualification letters. The remaining borrowers may need a pre-approval letter for their more complex or credit challenged finances in which the mortgage broker will verify all information through documentation such as tax returns.
Pre-qualification can be done face-to-face, over the phone, on with an on-line application. Gulfside Mortgage Service does not charge a fee however some lenders may charge an application fee or credit report fee. Borrowers should be prepared to supply information on their income, assets, liabilities and credit profile. It is not necessary to run their credit for a pre-qualification letter.
Cash buyers obviously do not need a pre-qualification letter. They should however be prepared to provide proof that they have sufficient funds to complete the purchase to the seller. This will strengthen their position when submitting an offer.
Contact Gulf Shores Realty at 941-488-6644 for more information or visit http://gulfshoresrealty.com/