Pre-approval Letters. That coveted letter from the lender stating you actually can buy a home. But now that you have one, here's how you can alter that pre-approval letter in your favor.
So you want to buy a house? Better know how much house you can actually afford. There is nothing worse then starting the search only to learn you can't afford that home of your dreams. Before dashing those hopes to bits, find out how much home you can really afford then look for homes in that price range.
With the market being as it is, you can probably look at homes about $10,000 over your maximum amount and hope the offer will bring them down into your price range. If you don't want to max out that loan, alter your search for however much you want to spend. Remember though how agents market homes; they will sometimes price a home at $249,900 and miss all those buyers starting their search at $250,000.
But how can you really make that pre-approval letter work in your favor? What if you are offering less on a home with a pre-approval letter that states you can afford more? Do you really want that seller to know you can pay more for a home but choose to offer less?
Regardless of what the seller may think, you have the right to alter your pre-approval letter for your benefit. The lender usually has to do this for you, but if you are fairly familiar with your lender, and in this case it really pays to be, have your lender write the pre-approval letter for the amount you are offering.
Here's how this works: When you apply for a loan and are approved for a certain amount, either have the lender write up a pre-approval letter stating you have been pre-approved for a loan but not list a certain price. This can work as the seller knows you have done the homework and applied for a loan. But having the exact amount of your offer stated on the pre-approval letter is even better.
Once you have been approved, search for homes you love. When you find that home and have worked up an offer price, then have your lender issue you a pre-approval letter for that exact amount that you can present to sellers with the offer. This shows the seller that you are a serious buyer that has done the financial homework and that you can actually afford the amount you are offering.
If there is a counter offer the listing agent will typically ask the buyer's agent if the buyer can go any higher. It is up to your experienced buyers agent to negotiate on your behalf without giving away all the information.
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