A letter or pre-approval is a document showing how much a particular lender is willing to lend you. It’s not a guarantee or approval, but it’s an essential first step before you start house hunting. If you’re working with a realtor, there’s a good chance that they will ask for a pre-approval letter before showing you properties. Why? The real estate agent doesn’t want to show you houses you can’t afford, and they also don’t want to waste their time if you can’t get a loan.
The pre-approval letter also helps you negotiate when it comes time to make an offer. The buyer knows you’re approved for a certain amount, which ultimately speeds up the process. Not only that, but since you’re pre-approved, the loan might be quicker to obtain. After the seller accepts your offer, you can start the appraisal.
You can certainly view an open house without a pre-approval letter. In fact, you don’t even need an agent to go to an open house. However, in today’s hot real estate market, properties move fast. Real estate agents are hesitant to work with buyers without pre-approval because they don’t have the readiness and bargaining power to be competitive.