When purchasing a home, it is important for buyers to get pre-approved before they make an offer. Investor guidelines are constantly changing, so it is important to know if a buyer is qualified to purchase a specific property. Lenders review each buyer’s credit history, income, and assets. This information helps lenders determine whether a buyer will be able to obtain a loan based on current lending guidelines.
Credit history helps the lender determine the buyer’s ability to repay the loan in a timely manner. Examining a buyer’s income lets the lender know if the buyer will be able to afford the proposed housing expense in addition to any other monthly obligations the buyer has currently. Lastly, a review of the buyer’s assets lets the lender see if the buyer has enough funds for the down payment and any closing costs associated with the purchase.
Once these factors are reviewed, a pre-approval letter can be issued to the buyer and the buyer’s realtor. This letter is presented to the seller with the offer letter. A pre-approval letter strengthens the buyer’s offer because it shows the seller that they are able to obtain financing.