Step #1 — Pre-Approval Letter & Proof-Of-Funds - Lauren Biedenharn
Step — Pre Approval Letter Proof Of Funds Lauren Biedenharn


Before you set off to find the home of your dreams, you first need to do a little homework. So put that dream-home Pinterest board down, it’s time to find out what loan you are qualified for, and for what amount. This will prepare you for your purchase. If you are using “all-cash”, then you only need a document called proof of funds and can skip this step and go straight to step #2.

10 Steps on How to Purchase a Home

When you have found the house you want to put an offer on, it’s customary to provide a pre-approval letter from your lender as well as proof of funds (for deposit and downpayment). This is step #1, since you should have this prepared before writing an offer. Even if you have “all-cash” you still will need proof of funds. Proof of funds is documentation proving you have the liquid cash to wire into escrow for deposit (typically 3% of your purchase price) as well as the down-payment (or full payment if you are not getting a loan). Remember: You will need this 3% deposit ready immediately to open escrow when your offer is accepted.

Most buyers need financing when purchasing a property. When you write an offer on a house you do not need your financing locked in completely, but you do need a signed letter from a lender stating they have checked out your finances and are confident in acquiring a loan for the said amount on the property in mind. This letter is necessary, if you want your offer to be taken seriously.

To acquire this pre-approval letter, you will need to work with your bank or mortgage broker. Together, you will discuss and go over all your paperwork and finances to see what you can afford. The lender will have you fill out an application and submit several pieces of documentation. Everyone is different and every case is special — so please use this as a general overview, and discuss in more detail with your team. Once your lender and you have completed the application, she or he will give you a signed letter with the amount you qualify for. Give this to your real estate agent to use for your offer on your property of choice.

There are a couple of notes to remember:

  1. A pre-approval letter is what is needed for an offer. A pre-qualification letter is not sufficient.
  2. Your lender may tell you a max amount you can afford. Let’s call this $X (X is your ‘buying power’). Even though this is your max amount, you may offer less than this if you feel it is the right choice and discuss with your real estate agent. Ask your lender to write a letter with the preferred number instead of your max amount to keep leverage.
  3. Your letter may also have your interest rate noted. Note: Usually you do not lock in your rate until you are in escrow. Discuss these details with your lender.

Once you have your pre-approval letter and proof of funds, you’re ready to talk business with your real estate agent and start looking at homes that fit your criteria, wish list, and price range.

Tune in next week for Step #2, hiring a real estate agent. As I mentioned in my introduction to this guide, my step-by-step tutorial is an interactive learning process. As an added bonus, I’m making myself available to answer any questions you may have. Don’t be shy! This tutorial is about empowering YOU, the buyer, as you set out on your mission to purchase a property.

For the fastest response you can comment on my Step #1 Video or reach out on social media here.





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