When you make an offer on a home, we need to be intentional about what your preapproval letter says to the seller.

The amount shown on that letter can either strengthen your offer -- or weaken your negotiating position.

Let's look at two examples...

Let's say you're approved for $400,000 and you are making a full price offer of $350,000 on a home that just hit the market.  You might want to include the $400,000 lender letter.

The lender letter with an approval amount above the proposed purchase price shows your financial strength.  The seller can see that you are comfortably approved above the purchase price and especially in a multiple offer situation, that added financial strength can sometimes make a difference.

But, here's another scenario...

You are approved for $400,000. The home you want to purchase is listed at $350,000 and has been on the market for three months. You plan to offer $325,000.

In this case, we likely should not include a $400,000 lender letter. Doing so shows the seller that you have plenty of room to increase your price, which weakens your negotiation position.

Instead, your lender can typically very easily provide a new preapproval letter that matches the offer amount.

There is no one size fits all answer here. The amount on your preapproval letter will likely depend on...

1.  How long the home has been on the market

2.  Whether multiple offers are likely

3.  Our overall negotiation strategy

4.  How firm you are on your maximum price

In our local market, the right approach can vary from one house to the next, so if you are ready to make an offer, let's talk through what we want to be communicating to the seller with your lender letter.