What is a lender letter and why do you need it?

When you want to start looking to purchase a home, one of the very first things that you're going to want to do is get a lender letter, and that realtor that you're shopping with is going to ask, have you talked to a lender yet? Do you have a lender letter? And you're, what's a lender letter? Well, that's what I want to talk to you about today. What is a lender letter and is that all it is?

No, there're several levels to lender letters. So let's talk about it. The very first out of the gate, a lender letter simply states your information as well as the qualification for your loan. So it's going to say something like John Doe, with all of your address and your information, is qualified to purchase a home for the purchase price of $400,000, with a down payment of 10%, using a conventional loan. That would imply that when your numbers were run and your financials were reviewed, you qualified for a $360,000 loan.

Now, at that point, you can put any amount down based on the loan program chosen, and you can go up or down in purchase price based on that. But ultimately, it's the loan amount that caps you out. And then if you only have 3% down or 5% down or 20% down, it will start to shift what that purchase price is. So that's the basics of a lender letter, and maybe it says something about the lender or the lending organization. Maybe it says what it's qualified based on. Maybe it has some criteria on it, that it's based on the sale of another home, or maybe it's based on you getting that job that you already have a job offer on, or maybe it has some other qualifying factor, but that's the basic premises of a lender letter. Now, what are the levels of lender letters? That's an interesting question because usually, people don't talk about that.

They just simply say, do you have a lender letter? Well, you start out with a pre-qualified lender letter. What is that? That means you filled out a loan application, whether you did it on your phone, online, or you did it in person, or over the phone with your loan officer, you completed a loan application. And in that loan application, you stated things about your financials. You stated how much money you have in the bank. You said how long you've been on your job, how long you've been at this address, and other pertinent information.

And based on all the information that you entered into that loan application, you're qualified. You're qualified for this loan amount. Now that's level one. It's the very basic of levels. It means that as a loan officer, I have not verified all of that information yet. Now, I'll send you a list of documents that [00:03:00] I want to review and those list of documents, we're going to cover on another video, but I'm going to send you a list of documents that I'm going to want to review that authorize or give credence to all of the facts you put in that loan application.

And so once I've verified how long you've actually been on the job, I verified exactly how much money you have in those bank accounts. Maybe I verified how long you've lived at different addresses or who else might be on the loan with you. All of these things, we've verified all of the facts through third party, documentation, or verifications. Once that's done, I now have a pre-approved lender letter. So it upgraded from pre-qualified to pre-approved.

There's one more level. That means if I've taken all those documents and I've submitted it into underwriting, and that can take a couple of days to a couple of weeks, depending on underwriting turn times. [00:04:00] But if I've submitted your full loan, the loan application, all of the supporting documentation, and I've submitted it into underwriting and in turn, I've gotten a loan approval from the underwriter, well, that means I have a fully approved lender letter. Sometimes depending on the lender that you're working with, you could also so get an earnest money guarantee stamp on that.

And that's what we do at the Rueth Team. If we've fully underwritten your loan file, we'll say that your loan condition [00:04:30] is fulfilled and we'll guarantee your earnest money based on the loan condition deadline. Now you'll still have other conditional deadlines on your contract, around the home, the appraisal, the inspection, any HOA docs if there is a homeowner's association. But per the loan, we're good to go. And that's an earnest money guarantee on a full approval lender letter. It makes a huge difference when you're going out shopping in a competitive real estate market. So make sure you ask the right questions. Ask your lender to upgrade your lender letter, and if you have any questions at all, I want you to make sure to ask for the Rueth Team. If you like this video, or you watch any other videos in this series, please make sure to like, subscribe, and follow our channel. I look forward to talking to you again soon.

Don't get sucked into a quick, easy online path of securing a lender letter. I know.. you're like.. but it's easy. I'm here to share that that "easy" online lender letter won't help you get under contract. When competition is fierce, stand out with a full Pre-Approval or TBD Underwritten Lender Letter. Pre-Qual? Pre-Approval? TBD Approval? It really matters! Have questions? Or want to get started today? Then give my team a call

Nicole Rueth
The Rueth Team of Fairway Independent Mortgage Corporation
750 W Hampden Avenue, Suite 500 Englewood, CO 80110
303-214-6393
www.TheRuethTeam.com