What Is a Verified Approval Letter—And How It Helps in a Competitive Market
March 16, 2021
“Congratulations, your offer was accepted!”
Those words are cause for celebration for every prospective homebuyer—and especially so when vying for a home in a hot housing market. Although there are factors when competing with other buyers that are beyond your control, there is one step that will give you an edge: Start your home search process by getting a Verified Approval Letter (VAL), an underwritten offer that shows sellers your financing is verified.
Buyers in 2021 are facing a market with low inventory and lots of competition. Any extra certainty helps.
Thankfully, in a time when buying a house feels daunting, the process of actually getting a VAL is relatively straightforward. With online tools like Rocket Mortgage® by Quicken Loans®, it’s easy to enter your information and connect accounts to share necessary documents. From there, it’s a quick process to connect with a Home Loan Expert who performs a full analysis of factors like credit scores, debt, income and employment status, then sends you on your way with a Verified Approval Letter so you can shop with confidence. Not to mention how helpful it can be to ask questions during a no-obligation conversation with a Home Loan Expert from America’s largest mortgage lender.
I can speak from personal experience with buying a home in a very hot 2020 market. Unlike when my husband and I purchased our first home several years ago in a buyer’s market, our experience in a seller’s market called for us to do more prep work to compete with multiple offers. From our very first meeting with our Realtor®, she made it clear that just being pre-approved may not be enough. She stressed the importance of taking extra steps to show sellers we were serious and ready to buy—before even touring a single home. One level above a pre-approval letter, a VAL signaled we meant business and put us on a more level playing field with prospective buyers who could make cash offers.
Unlike with a pre-qualification, getting a VAL requires pulling credit scores. However, we knew we’d have to take this step in our home buying process eventually, so the slight ding to our scores was a non-issue when compared to the benefits of the VAL. In a market where moving quickly is key, having these steps done ahead of time meant that there was no down time once we were ready to make an offer. With this pre-approval, we could show sellers, yes, we could afford homes up to a certain amount and, no, our financing wasn’t going to be an issue for closing.
I am grateful we took our agent’s advice to check this task off the list before looking at houses. We soon realized that houses would come and go in a single day in our market. If we found one we wanted, the last thing we needed to do was scramble to get a pre-approval letter. By getting a VAL in advance that is valid for 90 days, buyers can be confident they can be competitive when ready to make an offer.
At the same time, going through the pre-approval process helped us get a clearer picture of what we could afford. Although we couldn’t control the ever-changing mortgage rates and how that would affect our ultimate payments when we purchased a new home, we knew how much we would be approved to spend on a home. It also gave us a chance to assess our real comfort level with our budget, which led us to set our personal “max” below the pre-approval figure. With a VAL, the Rocket Mortgage® app makes it easy to customize your approval amount to match your desired offer amount, or adjust on the fly if this amount changes.
All the while, we were also preparing to sell our home—which, let me tell you, was a very different experience! In this position, we knew we could confidently expect a handful of competitive offers within days of listing our home. Again, our Realtor® counseled us to take into account whether a potential buyer had a pre-approval letter. We knew that if we were looking at two side-by-side offers for the same amount, the buyer who came with a locked-and-loaded VAL would win out.
After practicing patience and having a bit of luck, we were able to confidently make an offer on a home that checked all of our boxes. Even in a hot market, that one offer was all it took: Our bid backed by a pre-approval was accepted!
Although our lender still needed to consider the home’s appraisal value, condition and title before giving us the official approval, we were glad to know our finances weren’t going to hold up the process. When we turned around to list our first house, we were thrilled to get a number of offers within the first few days—and ultimately went with a buyer who had a pre-approval letter.
I can say from experience that buying a house in a competitive real estate market is an exercise in coping with a lot of unknowns. From waiting for the right house to hoping the seller will accept your offer, learning how to take deep, calming breaths is a helpful skill to have. With a Verified Approval Letter, though, you don’t just have to cross your fingers and hope for the best—you can actually give yourself an advantage.
Source: What Is a Verified Approval Letter—and How It Helps in a Competitive Market REALTOR.com (March 2021) Emily Glover