Question about pre-approvals

I got my pre-approval about 6 months ago- I bid on a house but was outbid. In the meantime, I haven't bid on any more houses but I figure it's time to get the pre-approval updated so I have it ready.

Here is my question..let's say I ask my loan officer to pre-approve me for $500k house. With 20 percent down, my loan would be $400k.

What happens if I find a house that is under $500k? Let's say the house I now want is $450k. Do I need to get the pre-approval updated to show the lower amount? I don't want the listing agent to think "Well, they can afford more so my seller shouldn't negotiate."

TIA

Re: Question about pre-approvals

Re: Question about pre-approvals

DH and i just wondered the same thing and from what he was told, you dont get pre-approved again, but if/when your offer is accepted they will re-do your loan amount to the correct number (assuming it is lower)...if it is higher i am not certain what will happen

Re: Question about pre-approvals

I think what your asking is whether it will hurt you in negotiations if your preapproval is for a purchase price that is higher than the price of the home you are making an offer on. I get this question all the time, and imo, the answer is no.

I think people understand that just because you could pay a bit more doesn't mean you are WILLING to for their home. Every buyer has a limit of how high they will go for a particular home, and that limit isn't always going to be the top of their budget, you know?

Another thing to keep in mind is that sellers biggest worry when accepting an offer is that they will go to contract, essentially taking their home off the market, and that the buyer won't be able to get financing, so the sale will fall apart a couple of months down the road. So when negotiating, they want reassurance that the buyer can afford their home and secure financing. Being a buyer who can easily afford the home and will have no trouble getting financing is a negotiating strength, in my view, not a weakness. If I am a listing agent and I have a home listed at $429K, and I get an offer of $400K from a buyer who is preapproved for $400K only, I am going to be worried for my seller, thinking this buyer might have to stretch to their max to buy the home. If I see a buyer preapproved for $450K who is offering $400K on a home, I know it is within their means and getting a mortgage shouldn't be a worry.

Also, from a practical standpoint, the seller may not ever see that preapproval letter. Your agent will submit it with the written offer, but when I present an offer for a buyer, I say, "the buyer is preapproved by x bank" but I don't reveal how much the preapproval is for. And the listing agent and seller rarely ask. And when I am a listing agent and get a preapproval, I keep it in the file, but I don't give the actual documents to the seller (unless they ask to see them, which they rarely do). I just let the seller know, yes, I reviewed the preapproval and everything's in order. Sometimes the written documents to back up the offer aren't even sent over until the verbal negotiations are done and a purchase price has been agreed upon.

All that being said, if you are preapproved for $1 milllion dollars but know you are looking in the $500K price range, I would get a preapproval more in line with what you want to spend. But if you are preapproved for $450K and ultimately want to buy a house in the $400K price point, there's no need to revise your preapproval.

Re: Question about pre-approvals

my morgatge guy just reissues a new pre approval based on what i am offering. Of course as long its the same amount or under then what i was orignaly preapproved for

Re: Question about pre-approvals

Thanks everyone. Christine, your responses are always so helpful and informative! I never thought of how showing that you can afford to pay more could help. It totally makes sense!