You’ve found a property that you really love and are excited about. It’s time to put your best foot forward and submit an offer. Here are the elements that go into your offer package.
Your agent will prepare the actual contract. It can be named several things like “Residential Purchase Agreement”, or something similar. You will work with your agent to complete the purchase contract based upon the price and terms you have discussed.
Pre-Approval Loan Letter
You will need a letter from either your bank or loan agent (whoever is helping you get your home loan), stating you are approved for a loan. You want it to state that they have reviewed your loan documents, and you are APPROVED for a loan with the following specifics (loan amount, term, etc.). To make your offer strong, you want to make sure you are “pre-approved”, and not “pre-qualified”.
Here are some things to consider on the loan approval letter. Work with your loan & real estate agent to have the letter match the purchase price on your offer. You don’t want to tip your hand by putting the max purchase price you are qualified for. Also, if you are pretty sure you’re interested in making an offer on a place, give your loan agent a heads as soon as practical that you will need the letter.
“Dear Seller” Letter
I think it is always important to include a cover letter with your offer. You can leave this up to your agent, or feel free to work with them on it. The letter is a good way to sum up your offer for the seller in a nice format. You can use this opportunity to explain why you are a strong buyer, why you love the house, and how you’re going to close the transaction fast for the seller. Some may think this “Dear Seller” letter is a bit corny, but trust me it really can’t do any harm. It might just sway things in your favor…. I’ve seen it happen many times.
Copy of Earnest Money Deposit
Provide your real estate agent with a signed check in the amount of your initial deposit. Your agent will include a copy of this check in the offer package. Once your offer is accepted, you will have to bring that check for the initial deposit to the title/escrow company. Again, remember that you do not include the actual check with the offer!
Copy of Approval from Automated Underwriting Program (optional)
If you want to further back up your claim that you have been approved for a loan, then you should consider providing a copy of the approval generated from an automated underwriting program. Your loan agent runs your loan file through a system like Desktop Underwriter (DU). It’s a computer program that analyzes your file’s strengths and weaknesses (income, credit scores, employment history, etc.). Based on this info, it provides a recommended approval or denial. Keep in mind that an approval from an underwriting program is not an official approval from a lender. The underwriter from your lender will use this as a basis for their decision. What is does demonstrate to the seller is that you truly have worked with a lender, and it gives them even more confidence that you will be able to successfully close the loan. Again, work with your loan professional on whether or not you include this information.
Your offer package should be as clean and professional as possible. You want to stand out (in a positive way), and give the seller the confidence that you will close the transaction on time! Please keep in mind that I practice real estate in California, so transactions in other states may necessitate additional documents.