What Your Pre-Approval Letter Tells the Seller (and What It Shouldn't)

Every serious buyer gets a pre-approval letter, and most treat it as a formality. It isn't. That letter tells a seller a lot about you, and how you use it can affect both your offer and your leverage.

Pre-Qualified Is Not Pre-Approved

Pre-qualification is a quick estimate based on numbers you tell a lender. Pre-approval means a lender has actually looked at your income, assets, credit, and debts and is willing to lend up to a certain amount, subject to conditions. Sellers and their agents take a pre-approval far more seriously, and in a competitive situation an offer with only a pre-qualification can get set aside.

What a Seller Reads in Your Letter

When your offer arrives, the seller's agent looks at the letter to judge how likely you are to close. They check the lender, the loan amount, and the date. A letter from a known local lender carries weight. A stale letter, or one for less than your offer price, raises questions before anyone has looked at your price or terms.

Don't Hand Over Your Ceiling

Here's the mistake I see most: buyers send the letter for their maximum approval with every offer. If you're approved to $500,000 and you're offering $425,000, a letter for $500,000 tells the seller's side exactly how much room you have.

Ask your lender to issue a letter for the specific amount of each offer, or close to it. Lenders do this all the time. Your agent can tell you how much to show for each situation. It's the same principle as the sign call: the seller's side doesn't need to know your limit. I wrote about that in what to say when you call the number on a yard sign.

If You're Paying Cash

Cash buyers use proof of funds instead of a pre-approval letter, usually a recent bank or brokerage statement. The same rule applies: show what the offer requires, not your whole balance. Your agent can help you redact or format the document so it proves you can close without revealing more than it needs to.

Protect Your Approval Until You Close

A pre-approval is not a guarantee. Lenders verify your finances again before closing, and things that happen in between can change the outcome. Opening new credit, financing a car or furniture, changing jobs, or moving large sums of money around can all cause problems. Before you do any of these, call your lender first.

Talk to More Than One Lender

Compare at least two or three lenders before you choose. Rates and fees vary, and so does how well a lender communicates when a deal gets tight on time. A local lender who answers the phone on a Saturday can be worth more than a slightly lower rate from someone you can't reach. Ask your agent who they've seen close deals smoothly in Hamilton County.