If you’re looking to buy a home, the first step may be to contact a mortgage lender. You will provide them with documentation, such as proof of your earnings, and they will then give you a preapproval letter. This will tell you roughly how much money the mortgage company believes they could lend you to buy a house.
This is an important step to take, as this is when many potential buyers will make an offer. Sellers will generally require preapproval letters because they don’t want to spend time looking at offers that may be entirely meaningless. You do not have to get final approval in order to make that offer. You can simply submit the rest of the documentation, along with the preapproval letter, for the consideration of the seller.
What is final approval?
The problem that sometimes crops up is that people will assume that their preapproval letter means that they are guaranteed to get that money. But this is not the case. They still may need to provide more financial documentation and get final approval. There are certainly individuals who will get a preapproval letter and then be rejected when the mortgage lender looks a bit deeper into their financial situation.
In fact, this is why many buyers will use contingency clauses saying that they have to get final approval for the mortgage or they can back out of the sale. The preapproval letter proves that this is not just a baseless offer and that it will likely go through, but buyers don’t want to be stuck having to make a purchase if the deal falls apart at the 11th hour.
Buying or selling real estate can be complicated. Those involved need to know exactly what legal steps to take.