The Difference Between Pre-Qualified vs. Pre-Approved
Your Buyer Must Be Pre-Approved Before You Show Them Property
A friend of mine told me that he was extremely frustrated with the home buying process and was turned down for a mortgage. He said he had a “Pre-Qualified” letter from his mortgage broker that he requested. He didn’t understand the issues that caused a roadblock in getting the loan he needed to purchase his dream home. I explained that his agent should have insisted that the mortgage broker provide a “Pre-Approval” (Loan Commitment) letter, from the beginning, verifying that they did a credit check, knew the income/debt ratio and then determined the maximum loan amount for him. If your buyer doesn’t have a “Pre-Approval” letter then you run the risk of your buyer not qualifying for the loan needed for the home they have a contract on. You’ve wasted the buyer’s time. You’ve wasted the listing agent’s time. If the buyer (as in my friend’s case) had a home inspection done, there’s more time and money wasted. His buyer’s agent had a number of contractors/vendors lined up to start doing home repairs, yet there were still contract contingencies. As a side-note: For whatever home updating issues the buyer is requesting a referral, the agent should provide the buyer with no less than (2) vendor referrals for each issue i.e. painting, carpeting, tile work, kitchen remodeling etc. I’ve always referred to the Pre-Approval letter as the “LOAN COMMITMENT” letter. It’s no wonder my friend, the buyer, was confused. He thought the Pre-Qualified letter guaranteed him the loan amount. Based on this fiasco, he won’t be recommending the buyer’s agent to any family or friends.
Moral of this story is — Agent’s need to INSIST that the lender provide their buyer with a loan commitment letter prior to showing them property.
Disclaimer: The opinions expressed in blogs on this website are solely those of Marcy Sanders. The information provided on this site is for general informational and educational purposes only.
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