Things to Note Before Using Mortgage and Loan Pre-Approval Letter Templates

The lending and mortgage sector is a big part of the financial industry. In the US, millions of people take loans every year for various reasons – buying a house, starting a business, buying a vehicle, children’s education, and others. Lending and borrowing are among the everyday tasks that a financial institution has to deal with. They receive hundreds of requests for getting pre-qualification reports and loan approvals. It is part of their job to provide applicants with the necessary information.

Handling hundreds of applications regularly and responding to each one of them can be a really hectic task. However, using a pre-qualification letter sample, financial businesses can build these letters speedily.

Banks, credit unions, and other financial institutions that provide loans and mortgages to people are the financial market’s lenders. Their business works by giving loans and accepting deposits from the public. Both of these are the pillars of these institutions. Banks need to maintain their brand image and gain people’s trust so that they can trust them with their money and overall financial decisions.

In order to build a positive lender reputation, financial institutions need to focus on their letter content, response time, and delivery accuracy. Excellent pre-approval letter examples can help banks quickly draft and send letters.

The loan and mortgage approval process needs a lot of background research, document verification, inquiry solving, and other procedures. These steps can take a lot of time without following proper home loan approval letter samples. There is a lot of document exchange required between borrowers and lenders during the loan approval process. Pre-qualification letters are built before pre-approvals.

Before knowing the difference between pre-qualification and pre-approval letters, it is important to know what these letters are meant for. Some people who are not very familiar with financial terminologies use the terms “pre-qualification” and “pre-approval” interchangeably. However, they are very different from each other. Let’s find out how.

Pre-Qualification Letter

A pre-qualification letter is one of the most common and important documents in the loan application and approval process. Such letters are sent to people as a response to their loan application inquiries.

Basically, people enquire about their loan eligibility by contacting the bank or some credit offering institution. That particular institution has to reply to these applications by providing them with a pre-qualification letter that states the estimated loan amount that they can process for the applicant. The letter also states whether the applicant is eligible for the loan, with some recommendations to improve credit score and improve the chances of getting a loan.

Pre-qualification letters are only sent to applicants who have made an online or offline inquiry about the terms of a loan and their eligibility. The details provided by the applicants should include their income, debts, debt-to-income ratio, assets, and some other details, as required by the bank. The bank will then use these details to provide a rough estimation of their loan eligibility, amount, and terms. The available mortgage alternatives are mentioned in the letter for the applicant to select from in order to move ahead.

Using a pre-qualification letter sample, finance companies can draft letters with personalized recommendations and offers. Although these letters are not very valuable in the long run, they can initiate a loan application and act as proof of buyer authenticity to real estate agents and potential sellers.

Pre-Approval Letter

Pre-approval notices are sent in response to official loan applications. These are more valid and useful letters as compared to pre-qualification letters. For getting a pre-approval letter, applicants have to submit various documents like pay stubs, bank statements, and credit reports.

In short, they have to give access to all their financial records for thorough verification by the underwriters. The finance-providing companies’ service is usually chargeable, as opposed to a pre-qualification letter that is usually provided free of cost.

You can follow a mortgage pre-approval letter sample to know what all things need to be included in a pre-approval letter. The interest rate and the loan amount are two specific details that must be included in the letter. Moreover, the loan term, type of loan, and other details are also added.

Pre-approval letters carry much more weight than a pre-qualification letter as it acts as an essential document in a lot of cases, like finalizing a deal with the house seller. It is not a legal document or a guarantee of loan approval, but it sure is very helpful in getting good deals from sellers.

Banks are required to print and mail many pre-approval letters every month to process loan applications speedily and maintain their daily operations.

Traditional or Manual Way

Traditionally, banks have been sending pre-approval letters manually for a long time. The drafting, printing, and mailing of were done with the help of the staff chapters. Hence, this is definitely an option that banks and other financial institutions have. However, with changing times and the nature of demands, manual operations have started to cause a lot of troubles like:

• Wasted time: Modern-day financial organizations do not have the time to waste personalizing every single pre-qualification and pre-approval letter. It can take several days to finish this task. Moreover, the process is always ongoing. Under this circumstance, the institution can end up wasting many hours of its employees.
• Delayed deliveries: Financial communication is time-based. The status of the pre-approval letters can change if the delivery is delayed too much. For example, before pre-approving a loan application, finance companies run various types of background checks on the applicant. The credit scores might change over time, altering the content of the pre-approval letter, which makes the timely delivery of letters extremely important.
• Decreased productivity: The tiresome and monotonous jobs of editing long letters with so many minute details can negatively affect the employees’ morale, leading to decreased productivity and bad results. Manual effort is prone to human errors, frustration, and tiredness. Hence, manually building, printing, and sending pre-approval letters is no longer a suitable way of doing the task. Decreased productivity with delayed responses and long approval processes can damage brand reputation severely.

Semi-Manual Way

The next option is using a mortgage pre-approval letter sample, although printing, enveloping, and mailing is still done manually. This can be referred to as a semi-manual way of sending mortgage and loan pre-approval letters by banks.

Semi-manual processes can definitely save some time, but it still takes a lot of effort on the part of the bank’s employees to print hundreds of letters, address and stamp, sort, and mail them. This semi-manual approach can eliminate a lot of repetitive tasks, but the financial organization will need to deal with mail fulfillment. Apparently, the bank would need a separate admin team to handle these tasks – increasing costs directly.

Automated Way

PostGrid offers a direct mail service platform for financial institutions like banks and credit unions. This platform and direct mail API integration with their CRM software to access the required data to draft pre-qualification and pre-approval letters. Banks can automate building letters, filling in details, customizing, printing, and mailing letters.

PostGrid’s all-in-one solutions can help financial services providers to use variable data printing and personalize every letter, which is otherwise impossible to do. You can also add customizations like logos, taglines, colors, background images, and different fonts. All the built letters are also saved in the system for future reference and record-keeping. They can be accessed at any time. Letters can be built, printed, and sent instantly through our platform and letter API.

PostGrid’s automation platform has features like:

• Quick integration
• Customization options
• In-built templates
• Template editor for building new templates
• Personalization
• User-friendly dashboard
• Bulk and on-demand mailing
• Address verification
• Address cleansing
• Real-time mail tracking
• Reporting and analytics

Templates save time and make the letters look professional. Hence, all banks and financial institutions use pre-qualification letter samples and home loan approval samples. Typically, a pre-approval letter includes:

• Borrower’s name
• Lender’s name and contact details
• Date of issue – these letters are valid only for 90 days from this date
• Purchase price – the price of the property
• Loan amount – calculated by deducting the down payment amount from the purchase price
• Loan term – number of months or years for repayment
• Type of loan – VA, FHA
• Property Type – Residential, Commercial
• Interest rate

Note: You are not always pre-approved for the same purchase price that you are looking for. Sometimes, you are pre-approved for more than the purchase price and sometimes less.

Requirements of a Pre-Approval Letter

Lenders write pre-approval letters to inform the about the lending terms to the applicants. It is important to mention all the relevant details in the letter and draft it in the right manner.

• Mention the borrower’s correct and full name: It helps in avoiding any transfer of rights and forging in case of real estate fraud. You can address the applicant using the word “dear.”
• Insert a date in your letter: Pre-approval letter examples specify the format where the date should be mentioned. Typically, these letters are valid for only a span of 90 days. The final approval process must be completed within this time period. Hence, inserting a date is essential.
• Explain the terms of the loan: Mention all the required details such as the pre-approved loan amount, property address for which it has been pre-approved, interest rate, loan term, and the type of loan program. Some banks also mention the required amount of down payment in the pre-approval letter. Mention these details in the form of bulleted points for clear understanding.
• Include a disclaimer before closing the letter: A disclaimer states that the letter is not legally binding. Moreover, a guarantee of loan approval should be included before signing off the letter. It should also be stated that the final loan approval shall not be obtained unless the specified requirements are fulfilled. The applicants should be made aware that the loan application shall either be accepted or rejected after the final underwriting and approval process.

Pre-approval letters are not always positive and confirm your eligibility for getting a loan. Financial institutions also use pre-qualification letter samples that clearly state that you cannot get a loan at present. They are likely to provide some feedback on improving your credit score and cleaning up your financial situation. But, there are certain things to be kept in mind while applying for a pre-approval letter.

• Estimate your financial needs in advance. Before applying for a loan, make sure to know how much you exactly need and how much you are capable of paying every month. These two things will help you get an idea to strengthen your application letter. Furthermore, you can always be ready with your documents in advance, if you know the details. It is safe to know more details about an offer rather than just knowing the estimated sales price and making a loan application on that basis.
• Gather personal data. Lenders are sure to ask for your personal and financial details in the form of various documents like:

1. 1. 1. A government-issued ID (passport, driver’s license)
      2. Employment verification (letter from employer on letterhead)
      3. Income verification (pay stubs, tax returns)
      4. Credit score (you can get a credit check done beforehand)
      5. Proof of assets (stock portfolios, bank statements, property documents)

• Make inquiries in advance. You can contact the bank and ask questions regarding the pre-approval letter and clear any assumptions and doubts that you have.
• Apply. The next thing to do is apply for a loan. Pre-approval letters are given in response to official loan applications. Hence, you will need to follow the complete procedure to file an official application. You can simply visit the nearest branch of a bank, credit union, or some other financial institution that provides loans. Elsewise, you can visit their website, download the application form, and complete and submit it with the required documents. The decision of issuing a pre-approval letter is first taken by the underwriter and approved by a loan officer – this process can take up to 10 business days.

Be careful not to sabotage your chances of getting your loan approved. Pre-approval letters are not a guarantee of loan approval. It is just a part of the loan approval process, which is why it is called “pre-approval.” You need to take care of certain things while applying for a pre-approval letter and also after getting it.

• Do not quit your current job or make a career change. It can affect your loan-taking capability negatively in the eyes of your lender. A lender might completely strike off your loan application if you have recently changed your job or entered a new field of work.
• Do not make any big purchases – be it home renovation items or a car. Avoid buying anything that is too expensive and can be noticed on your credit report. Even all-cash transactions that revolve around big purchases should be avoided.
• Do not take fresh loans before you are applying for another loan or after getting a pre-approval letter. Try to be as “financially quiet” as possible. Taking any type of car, education, or other loans during another loan’s application process can sabotage your application completely. Hence, it is advisable to focus on the primary need and not take other loans.
• Do not miss credit card payments or increase your dues payable. Potential loan applicants should make their payments on time and not keep any outstanding dues. A pre-approval letter is not a written guarantee that allows you to take a loan. It is not a full-proof document. Your pre-approval letter’s status can change at any time if you make mistakes like missing the due date of your credit card payments or not paying other bills on time.

Banks and other financial institutions use pre-qualification and pre-approval letters regularly for initiating loan applications and processing. Manually, it is impossible to print and send well-written and personalized letters fitting individual people and businesses’ personal needs. Using direct mail automation software, financial institutions can print and mail thousands of letters every day. It is also very convenient to use pre-qualification letter samples and mortgage pre-approval letter samples for completing the task.

PostGrid’s direct mail automation platform and API offer printing and mailing personalized pre-qualification and pre-approval letters. Use PostGrid for accurate letter drafting and mail fulfillment.