You may have taken a decision to buy a home for yourself but have not yet identified and finalised what you want to buy Your search for that all important home might still be far. Yet there is something very important that you should initiate with few banks and lending institutions and that is to apply for a prequalification letter to buy a house. You would require to fill in an application form wherein you furnish personal, family and employment details. The family details, ages of your children, the vehicles you own etc help the banks estimate your requirement of funds on a monthly basis which is than compared to your take home salary to arrive at a fair picture of your income and expense statement. Simply based on this information, banks shall give you a prequalification letter indicating the amount of loan that they are willing to provide towards home purchase subject to certain other diligence that the bank may perform. Hence a prequalification letter des not guarantee you a mortgage loan but merely indicates the amount of loan that the bank would be willing to offer you based on the details filled in the form. The amount indicated in the prequalification letter should help you finalise the budget of your property and hence help you target the right properties for inspection and finalisation. It will surely help you get a clear financial picture of the various sources from wherein you are going to organise funds for your dream house.
A possession of a prequalification letter not only indicates your seriousness and keenness to purchase a property but it also shows your financial preparedness. In fact quite a few of the real estate agents would not like to engage themselves with individuals who are not in possession of this letter given the recent trends in mortgage financing. Show the broker your prequalification letter and his interest and eagerness to work with you increases manifolds. In case of your decision to use hard money for financing your purchase, the hard money lenders would also organise to provide you with a prequalification letter.
The objective of a prequalification letter is to help you focus your energies and effort on identification of the right property rather than worry on the financial aspects. Once you have a prequalification letter you are more or less certain that the financial aspects are taken cae of and you don’t have to face certain disappointments at the last leg as you are aware of the property budget. Imagine searching a property for months only to find that you simply do not have the credit available to fund your purchase. The biggest and the most vital advantage that the possession of a prequalification letter does is that it provides you with a huge negotiation power given that the seller is almost certain that the deal is likely to go through.
Go ahead and make use of this instrument to help you prepare better in your search for your dream home. You are also sure of some savings coming by through better negotiations since you have this all important letter.