You’ve found your dream home, and you’re feeling both excited and nervous to put in an offer. Then you find out you need a pre-approval letter. But what exactly is a pre-approval letter?
A pre-approval letter comes from a bank or lending institution and states, at least tentatively, how large of a loan you will be approved for. There are a number of factors that will determine what you are able to spend, things like credit scores, your combined income, and how much debt you have. More important than how large of a loan the bank approves you for though, is how expensive a home it is truly prudent to purchase.
Make sure you have a budget in place for how large of a monthly payment you can comfortably afford, rather than simply looking at homes within the price range provided by a lender in a pre-approval letter.