A preapproval letter is a statement from a lender that the lender has reviewed the buyer(s) income, debts, credit, and finances. This statement also will explain the type of loan the buyer would be obtaining, details of the loan like rate and term, and any other conditions that the lender might require for buyer(s) to obtain financing like clear title, satisfactory appraisal, closing cost concessions, additional verifications, etc.
A prequalification letter is similar to a preapproval letter, however the lender has not reviewed the buyer(s) information, but is relying upon the buyer(s) statements as fact to determine eligibility for financing. A prequalification letter is not a strong as a preapproval letter.
Buyer(s) paying with cash (literally they have the cash in a bank account for immediate withdrawal) will need to provide proof of funds from their financial institution. This letter or document may have account balances (with private information of the buyer(s) redacted) or a letter from the financial institution on letterhead stating the buyer(s) have funds available to satisfy purchase terms for a specific address or price point.
In today’s market, it is imperative that buyer(s) trying to purchase have strong preapproval letters to differentiate them from other buyer(s) and offers. Likewise, buyer(s) paying “cash” need documentation that they have funds readily available. CENTURY 21 Prime South has a policy for our agents’ security in addition to a professional responsibility to all parties involved to obtain a preapproval letter or proof of funds prior to showing a prospective buyer(s) any property.
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