What is a Prequalification Letter?

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When you’re ready to start looking at homes, the first thing your agent will tell you is to get a prequalification letter. This letter is your license to buy a home; it tells the buyer, not only are you ready to buy a home, but that you are able.

There are two important parts to a prequalification letter. The most important is the payment amount; make sure you have a payment amount you are comfortable with. The second is your financials. To close the loan you need to present all your bank statements, pay stubs, W2s, tax returns, etc.

Once you’ve established a comfortable payment amount and your lender has gone over your financials, the lender will write a letter stating you can buy a house for a certain amount. You are able to show the buyer and close faster in this highly competitive market.