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What is A Verified Approval Letter And Why Is It Important To Have One?

Cathie Ericson5-Minute Read
January 20, 2022

The home buying process can be stressful. The last thing you want is to worry about having your mortgage financing lined up – or that you might be outbid on the house of your dreams because the seller doesn’t realize your financing is airtight. That’s where a Verified Approval Letter (VAL) can help give you the edge in today’s tight market.

What Is A Verified Approval Letter?

A Verified Approval Letter can give you a competitive edge by showing the seller that your finances are secure. It’s the end result – and final confidence-building step – of the Verified Approval process[1]with Rocket Mortgage®.

Is A Verified Approval Letter The Same Thing As A Mortgage Preapproval Letter?

Most mortgage lenders will offer a “mortgage preapproval letter” or “mortgage approval letter,” but these are just generic terms referring to proof of preapproval. By contrast, the VAL is the end product of Rocket Mortgage’s Verified Approval process, showing that you have been preapproved by a trusted lender with a brand name that gives confidence to sellers.

Prequalification Vs. Preapproval: What’s The Difference?

When you begin the home buying process, you need to be aware of your housing budget so you know how much house you can afford. Many lenders will offer prequalification and preapproval letters, and while they sound similar, they differ in one key area. A preapproval means that the lender has thoroughly looked through your finances and has agreed to loan you the specified amount. A prequalification merely states how much you “qualify” for, based on the information you give your lender.

When a lender like Rocket Mortgage conducts the mortgage preapproval process, they look more closely into your finances to verify the information you have supplied. They’ll confirm elements such as your salary, credit score, outstanding debts, and other financial factors to confirm how much they will lend you. That’s the amount that will be cited in the VAL.

Why Do You Need A Mortgage Preapproval Letter?

In today’s hot real estate market, most properties receive several “bids,” meaning many home buyers are competing to be the one who gets the home. Sellers look at each of these offers to choose the one they think is best for their circumstances. While a high dollar offer is certainly the most important factor, it’s not the only thing they look for. They want to be sure that the closing will happen swiftly and easily, ensuring that the sale can be completed. If a buyer hasn’t been approved as a borrower, their financing could fall through at the last minute, leaving the seller without a buyer.

Therefore they aren’t likely to accept offers without a mortgage preapproval letter. Getting that early and thorough verification shows how serious both the borrower and the mortgage lender are about the offer.

What Does Rocket Mortgage Preapproval Process Verify?

While most lenders offer a version of a preapproval process, not all are as thorough as Rocket Mortgage’s Verified Preapproval process. They may just check one parameter of the factors cited below; Rocket Mortgage verifies all three at the preapproval stage. If a mortgage lender doesn’t expressly verify all information prior to issuing the preapproval, it could imperil the sale if you later realize you don’t have the financing you assumed you did.

Here are the factors Rocket Mortgage will verify:

Credit History

Your credit history is one of the key factors a lender like Rocket Mortgage uses to determine the amount of home loan you will qualify for and your interest rate. That’s because the way you handled paying back loans in the past is a good indicator of how you will in the future. While Rocket Mortgage takes a variety of factors into consideration such as your down payment, typically a borrower will need a credit score of 620 or higher for a conventional loan to qualify for the best interest rates. Not sure what your credit score is? It’s wise to check before you start applying so you can take action to boost it if needed. Find out how to check your credit score here.  

Income

Another key factor in the amount of money you’ll be offered is your income, which drives the amount you can afford for a monthly house payment. Rocket Mortgage will verify your income through documentation that includes reviewing an applicant’s pay stubs and W-2s, to be sure that the amount they offer to loan you is as accurate as possible given your current income situation.

Assets

Finally, Rocket Mortgage will verify the account statements provided by the borrower during a preapproval review in order to get a more accurate and full picture of your financial status.

What’s Included In A Verified Preapproval Letter?

Once your finances have been verified, Rocket Mortgage will move into the letter stage, which will detail the amount of money you’ve been approved to borrow. Here’s where you can gain the upper hand in negotiations: Even if you have been approved for a larger sum, you can request that the VAL show a smaller sum which gives you wiggle room to negotiate if you are participating in a bidding situation.

For example, if you’ve been preapproved for $300,000 but want to offer on a house that’s listed for $250,000, you can request the VAL show a preapproval of $250,000 so you can move up to $300,000 if needed to, to win a bidding war. The seller won’t know your upper limit, but you can adjust up to that $300,000 mark if needed during a multiple offer situation.

Does Getting Preapproved By One Lender Preclude You From Getting Your Mortgage Elsewhere?

While securing preapproval is an important step toward succeeding in the house hunt, especially in a competitive market, it doesn’t obligate you to get your home loan through the mortgage lender that preapproved you. It’s wise to compare rates and terms to make sure you’re getting the best deal for your situation. So even if you’ve already talked to another lender, it’s not too late to check the offer that Rocket Mortgage can make.

The Bottom Line: A Verified Approval Letter Can Help Your Offer Stand Out

When you’re house hunting, the last thing you want is to see that property slip from your grasp because you weren’t prepared financially to make an offer. That’s why a strong preapproval from a reputable lender can help your offer stand out to a seller and increase the likelihood that it will be accepted.

Why not start the preapproval process with Rocket Mortgage? Our Home Loan Experts can answer any of your questions along the way and help smooth the road toward your dream home.

[1] Participation in the Verified Approval program is based on an underwriter’s comprehensive analysis of your credit, income, employment status, debt, property, insurance and appraisal as well as a satisfactory title report/search. If new information materially changes the underwriting decision resulting in a denial of your credit request, if the loan fails to close for a reason outside of Rocket Mortgage’s control, or if you no longer want to proceed with the loan, your participation in the program will be discontinued. If your eligibility in the program does not change and your mortgage loan does not close, you will receive $1,000. This offer does not apply to new purchase loans submitted to Rocket Mortgage through a mortgage broker. This offer is not valid for self-employed clients. Rocket Mortgage reserves the right to cancel this offer at any time. Acceptance of this offer constitutes the acceptance of these terms and

Cathie Ericson

Cathie Ericson writes about personal finance, real estate, small business, education, retail/ecommerce and other topics for a host of brands and websites. Her work has been featured on major media websites, including U.S. News & World Report, Forbes, Business Insider, The Oregonian, Industry Dive, Boston Globe, CNBC, MSN.com, Realtor.com and Yahoo Finance, among many others. Find her @CathieEricson.com.