Can You Make an Offer Without a Pre-Approval Letter?

making an offer without a pre-approval letter

You’ve found the home of your dreams. You can already picture where you’ll place your furniture, the décor you’ll purchase, and what color the walls will be. This is the house you want to live in for many years to come. You’re ready to make an offer.

But wait. You don’t have a pre-approval letter yet and neither do you want to wait and miss out on this opportunity. So should you be making an offer without a pre-approval letter?  

A home financing company and your real estate agent will encourage you to get pre-approved before starting the search so you won’t run into this situation. Sellers are more inclined to consider offers with a pre-approval letter attached. They want to make sure you have a high chance of receiving the proper financing needed to purchase their home.  

Here, we’ll answer your questions about whether you can make an offer without a pre-approval letter, when to get pre-approved, and the benefits of doing so.  

When to get pre-approved for a mortgage 

If you’re thinking about buying a new home, getting pre-approved for a mortgage is an important starting point. When you’re pre-approved, you’ll know how much you can afford. Your pre-approval letter will guide you in the right direction as you begin your search for a home.

It’s recommended to start the mortgage application process as soon as possible, even when you’re just thinking about purchasing a home. That way, if you come across a home you really like, you can make a strong offer right away.  

What are the benefits of getting pre-approved? 

If you’re unsure whether to get pre-approved or not, know that there are benefits to having a mortgage pre-approval letter. While getting pre-approved doesn’t guarantee financing, it’s beneficial to have it so you know how much you can spend. Plus, you do not need to worry about which mortgage lender or home financing company you choose right away. Getting a pre-approval doesn’t commit you to using that mortgage lender or home financing provider.  

Getting pre-approved will help you focus on the homes that you can afford, so you don’t find yourself in a situation where you put an offer on a home, only to find out you can’t secure the proper financing. Additionally, it helps you get your mortgage application ready. Your financial situation will be assessed and the financier will run a credit check using your credit report. If there are any issues, you can get that fixed early on before putting in an offer for a home. 

What’s in a pre-approval letter?

A pre-approval letter is a document from a mortgage lender or provider of alternative home financing. It states the amount of financing that financier is willing to provide to you to buy or refinance a home. The letter also typically includes other information such as the interest rate you qualify for. It will help you understand the amount of the down payment you should expect to provide and what your monthly mortgage payments will look like. The letter will state that your pre-approval is valid for a set length of time and under specific conditions.

A mortgage pre-approval letter is not a guarantee of financing, but it shows that your financial information and credit scores have been verified. As long as nothing major changes with your credit report, employment, or financial situation, you should be able to secure the home loan or alternative home financing that you have chosen.

The process of getting pre-approved

The pre-approval process involves submitting an application and documentation regarding your finances. the documentation you will need to provide includes things like ID, bank statements, tax documents, and statements relating to other debts you may have. All of the information will be verified and the financier will run a credit check to ensure that it is likely that you will be able to cover mortgage payments.

After this process is complete and you’ve received your approval letter, the rest of the financing process is faster from there on out. Once your offer is accepted on a home, you’ll just need to update your application with the details on the home you’ve chosen.

When NOT to get pre-approved for a mortgage 

If you’re thinking about skipping the step of getting a mortgage pre-approval, know that it isn’t impossible to make an offer without one. There is no law that states you cannot put in an offer without a pre-approval. You can always try submitting the offer without a mortgage pre-approval letter; however, note that sellers typically prefer offers with pre-approval letters over those without. The letter gives the seller assurance that if they accept the offer, the sale of their home will go smoother since they know you are able to secure financing. 

Keep in mind that your chances of getting an accepted offer without a pre-approval letter will vary based on the real estate market you’re in. If it’s a buyer’s market, where buyers have more options, sellers may consider any offer they can get. But if it’s a seller’s market, where sellers are receiving multiple offers, a seller may dismiss the offers lacking this letter indicating likely mortgage approval.  

Are there any scenarios in which pre-approval isn’t necessary? 

Since there isn’t a set rule that you absolutely must submit a pre-approval letter with an offer, there are some scenarios where it isn’t necessary. One example is if you are paying all cash for a home. An all-cash transaction doesn’t require home financing, so mortgage prequalification in this case isn’t necessary.

Another scenario is if you aren’t able to get the letter in time, but are willing to present in-depth financial information. Show your credit history, job history, and supporting financial documents that can prove your high chances of obtaining home financing to the seller. This could potentially boost their confidence in accepting your offer without a pre-approval letter.  

Frequently asked questions  

After understanding the benefits of having a mortgage pre-approval letter, you may still have a few questions. There are many common questions from first-time homebuyers and this includes those about pre-approvals. Here are a few frequently asked questions.  

Can I look at a house without a pre-approval letter? 

While having a mortgage pre-approval letter isn’t mandatory to look at a house, a real estate agent will usually prefer that you have one. It shows that you are able to purchase the home if you end up liking it enough to put in an offer. Real estate agents prefer you have it so they know you are a serious buyer and aren’t just showing homes to everyone just because they’re curious.

It may be in your best interest to have one for your own sake as well, since you’ll know whether you are able to purchase the home.

Can I make an offer on a house with a pre-qualification letter? 

Have you been pre-qualified, but not pre-approved yet? There is a difference between pre-approval vs. pre-qualified. Getting pre-qualified is a starting point and gives you an estimate of how much you can borrow based on the information you provide. But a strong pre-approval letter could convince a seller to take one offer over another.

Getting pre-approved for a mortgage requires a bit more effort on your part like needing to verify all the information you provide, so the pre-approval sends a message to the seller that you’re a serious buyer whose finances have already been vetted.  

What if my pre-approval amount is more than the home’s listing price? 

Your pre-approval amount may turn out to be more than what you’re offering for a home. If what you’re approved for is way over the amount you are offering, it may be worth asking your home financing company to change the amount on the letter if you are sending this with your offer to the seller. That’s because if the seller sees that you are financially able to spend more on their home, this can potentially take away your negotiating power. 

How do I know if my pre-approval amount aligns with my monthly budget? 

If you keep a monthly budget, you may be curious to know how your pre-approval amount will align with it. You may find you are approved for more than you expected and more than what you want to spend on a monthly basis. Make sure to figure out how much you are comfortable paying per month. You can then search for houses that are below the amount you are approved for to stay within that budget.

You do not necessarily need to find a house at the exact price that you are approved for.  

5 tips for making a winning offer in today’s housing market 

Finding a home that you like and can see yourself living in for years to come is just the first step. You’ll need to make an offer to the seller. Especially in a seller’s market, you may come across situations where multiple buyers are bidding for the same home. Just because there are others interested in the same home doesn’t mean there isn’t a chance you can’t outbid them.

Here are some tips and strategies to make a winning offer on your dream home.  

1. Get pre-approved for a mortgage. 

This is the first step in the homebuying journey. It is recommended to know how much you can afford to guide you in your search. Otherwise, you might just be wasting time looking at homes that are above your budget or miss out on ones you thought you couldn’t afford. Not only that, getting a mortgage pre-approval may be preferred by the seller as it shows you are a serious buyer.

2. Find and use your own real estate agent, not the seller’s. 

Some home buyers think that they can get a better deal when working directly with the seller’s agent. This isn’t necessarily the case. You want someone working for you. That’s what a buyer’s agent will do. They will represent you, negotiate and strategize your offer, and work on your behalf. Remember, the seller’s agent is working in the interest of their seller, not you.

Find a buyer’s agent and pay them their fair share of a commission. They are in the market, house hunting day in and day out, so they know it best.  

3. Leave a little room for negotiation, but offer a respectable amount. 

Homes are usually priced based on the market. As much as you may want a good deal, don’t lowball the seller. This can shut down any possibility of negotiation. While negotiating, think as if you were in the shoes of the seller. Selling a home can be emotional, as it may hold many memories for a seller, so a low offer can come across as offensive. Make sure you offer an amount that can at least start the conversation.

And remember, the seller can see how much you can afford when you include a pre-approval letter with your offer.  

4. Include enough earnest money to make it worthwhile to the seller. 

Putting earnest money, also known as a good faith deposit, shows your interest in the home so much so that you are willing to put money towards it. This money is usually held by an attorney or sometimes a real estate agent upon signing the contract. Express your wish to put down more to show your seriousness.

Just take into consideration that you need to go through with the contract or there are possibilities you may lose the money. 

5. Take it easy on the contingencies (don’t make the seller jump through too many hoops) 

Contingencies are conditions or requirements that must be met before entering into a contract. An example of this in the homebuying process is if you don’t get the financing in an agreed-upon timeframe, the contract will not be valid. Or an appraisal contingency where the price may be renegotiated if the appraisal comes back less than the price being paid.

Having too many of these contingencies may make the seller move on to another buyer who has less requests.  

What do I have to do to get pre-approved? 

If you’re wanting to purchase a home in the next four months, you’re actively searching, and you’re getting ready to make an offer, it may be time to get pre-approved. Consider partnering with Guidance Residential. Our Islamic home financing may look similar to a mortgage in some ways, but it is based on an entirely different foundation.

Islamic finance is free of riba (loosely translated as interest), and it is a halal (or permissible) way for faith-conscious Muslims and non-Muslims to buy a home. Find out more about how an Islamic mortgage works and discover the Islamic home buying process

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