Pre-Approval letter needed?

As a new investor, do I need some kind of a pre-approval letter from a lender/mortgage company, for Brokers to take me seriously and give me the info I ask for so I can run my numbers?

Credit score 692 and just got a credit adviser to dispute and improve my credit, hopefully above 700.

Yes, a pre-approval letter will help. Cash in the bank is even better.


Learn to buy without a Realtor, without credit and without cash…

And yes cash is King…

Really, without cash or credit please spell it out for me would you? I would be happy to leave the realitor behind.

You need to get pre approved. Cash in the bank is good but I would suggest that you use leverage to get your properties instead of cash. Without leverage real estate is no better than any other investment. Using leverage allows you to control more property than cash will allow. Most people doing real estate with cash run out of cash before they run out of deals.

I would argue that many people who do nothing but leverage often run out of cash eventually as well… and lose everything and then some. I have seen it from investors over and over and over again.

I am sorry. I should have taken time to explain how I think. One of my major philosophies is that you should not cut brush. In other words don’t reinvent the wheel. You find someone that is doing what you want to do and do what they do. That way you don’t make mistakes like you are saying. That is why when you bring up some hypothetical random failure I don’t go there. You don’t run out of money when you use leverage. You run out of time or you get distracted by something else.

I understand that all real estate (like politics) is local. That means that where you are and what you are doing may be better to do using cash. But there is no area that using leverage will not increase you return and provide you with a better investment. So you may want to explain where in this world leverage does not work.

Even if I do have cash in the bank. How does a broker know that?

A Bank Statement


yes, you need a pre-approval letter as that shows you have actual talked to a bank and have some chance of getting a loan. Otherwise, it means you are guessing an hoping you can get it work and in this lending environment, you need more than a FICO score and pulse to get a loan.

these days, I don’t even respond to offers (as a seller) without some type of pre-qual, bank letter,etc. I’m orking a deal right now where my Buyer has 20% down and a mid 600 FICO and still having trouble to get thru underwriting on a 80% LTV loan.


Question… Is that transaction a canidate for seller financing, either as a wrap or Land Contract? 20% down may allow you to have the best of both worlds…

just a thought.

Michael Quarles

also aak5454,

if they are having trouble at 20% down, they need to find a new mortgage guy. that’s a shame.

Just my 2 cents, but if there isn’t enough equity in the deal to use hard money, find another one where there is enough. Not that you should use hard money on every deal, but if either that option or seller finance/subject to or something else creative isn’t available you should probably move on to the next deal. I only say this because theres a ton of good deals out there and usually no need for bank financing. Bank financing can be a headache for investors, especially right now.

Best wishes,

Sean Flanagan

How could I work a deal with a seller for subject to with me buying house for 200,000 and he owes 145,000. What about the other 55,000? How is that paid? fmv is 250,000

Up to you to negotiate it with the seller. Try to sell him on holding a second till you resell the house or find a private investor to lend you the money and hold a second.


The answer is (so often), IT DEPENDS.

If you are making an offer on a FSBO property, then a pre-approval letter may not be needed, nor even suggested by the seller.

If you are making an offer on an REO, then the bank will not even consider your offer without some proof of funds or a pre-approval letter.

If you are making an offer on an MLS listed property (other than an REO), then the real estate agent is the one most likely to request a pre-approval letter. Agents want a commission. They will be more aggresive in presenting your offer if the agent is confident that you have the ability to close the deal.

If you have a track record with an agent, then you may never be asked for a pre-approval letter unless the buyer requests one. If you are new to the agent, it does not hurt to have some evidence that you are a serious buyer.