Making the Most of Your Approval Letter

As of June 25, 2018, we’ve made some changes to the way our mortgage approvals work. You can read more about our Power Buyer Process^TM.

Getting a mortgage is often referred to as “the mortgage process,” with an emphasis on the “process” part. It’s not a one-and-done type of event (as much as we all want it to be), but getting preapproved can set you up for success. When you get preapproved you get a beautiful document called a preapproval letter, also known as your PAL. But before we get ahead of ourselves, let’s nail down the preapproval basics.

Preapproval and Prequalification

Avid Zing Blog readers might remember a blog about this exact topic written last year, titled Preapproval vs. Prequalification. It’s a quick and informative read, but here’s the gist of it.

A preapproval and a prequalification both give you an estimate of how much house you can afford. When you get preapproved, we pull your credit and ask you a few questions to figure out your debt-to-income ratio. When you get prequalified, we don’t pull your credit. While prequalification gives you an estimate of what you can afford, it’s not as accurate as a preapproval.

What Does My Preapproval Letter Show Me?

Once you’ve been preapproved, you’ll receive your physical (or digital) preapproval letter. This letter contains some vital information about your home loan.

During the mortgage process, your credit score and finances are under a microscope. That’s why, first and foremost, we cover some ways for you to keep your credit score and your loan on track. Here’s a list of things to do and NOT do when you’re getting a mortgage:

• Make sure you can verify all large deposits to your bank account.
• Keep up those timely rent or mortgage payments.
• Don’t overdraw your checking account.
• Don’t change jobs.
• Don’t open new accounts that can increase your monthly debt (e.g., credit cards or loans).
• Have a detailed two-year history of income sources – the more accurate the better.
• Discuss all seller concessions with your mortgage banker.
• Discuss your down payment with your mortgage banker.

Next, you’ll see information tailored to your loan. Here’s an image of the breakdown you’d see in a Quicken Loans PAL, with filler information.

As you can see, your PAL gives you an excellent summary of your loan and financial tips to help you secure your new home.

Can I Adjust My Preapproval Letter?

Short answer: Absolutely! But why would you want to do that?

Say you’ve been preapproved for $200,000, but you only want to offer $150,000 on a house. You have $10,000 for a down payment. You can adjust your preapproval letter to show that the maximum loan amount is $140,000. This way, the seller sees that you can afford the home, but he or she won’t know how much you’re actually preapproved for. This will give you some ammunition when it comes to negotiating your new home purchase price.

Luckily, Quicken Loans makes adjusting your PAL very easy with MyQL.com. After you log in to MyQL.com, click on the “Documents” button on the top of the home page. This will lead you to the documents main page, seen here.

Depending on which phase of the mortgage process you’re in, your PAL could be in different sections on this page. That’s why we recommend clicking on “ALL DOCUMENTS” listed on the far right. It’s the easiest way to find your PAL while your mortgage is in process. Once you’ve done that, you can scroll through the documents page until you find your PAL. It’ll look a little something like this:

Click the change button. This will lead you to the next page, which will tell you the advantages of adjusting your PAL, your current PAL amount, and how to modify your PAL. You can do that by entering a new purchase price in the section that looks like this:

From here, simply enter your new purchase price. Once you hit “calculate”, you’ll see your new purchase price, down payment, and loan amount. If you’re happy with these numbers, click the “Generate New PAL” button to save your information. Now, you’re good to go with your adjusted PAL! If you have any further questions on PALs or how to adjust them online, please comment below.