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Location: Pennsylvania - Montgomery County
Submitted 08/27/07 03:31 PM
Q. Purchasing a Home: Should a Buyer be providing a Seller with "Buyer's Financing Information" form?
We are currently purchasing a home in USA (Pennsylvania, Montgomery County) and are being told that as a buyer, we must disclose to the seller in writing our financial information including our income, our savings accounts, source of down payment, source of closing costs, etc., to demonstrate intent to buy. We are serious about the home, but in my understanding, a pre-approval letter from the Lender (which we have provided), informs the seller of buyer's ability to obtain a loan to purchase the home. Does buyer have any duties to seller to provide the information? Is there really such a law, or is this something that their agent is asking on a voluntary basis? We don’t want this to be an advantage tool to the seller when/if we’ll be negotiating the asking price in currently competitive buyer’s market.
Please let me know what you know, or share your own experience and links you may have... Thank you.
We are ready to sign the contract and give $1,000 check as a down payment to the agent/seller, in addition to the pre-approval letter from the nationally-recognized financial institution we had provided earlier to our/their agent. I would think this would show the seller that we are for quite serious, right? Again, its not about the current market, but about the law and real estate practice, and what we must provide vs. what we're willing to provide...
I have never heard of providing your financial information to a seller. What a great way to have identity theft. Don't do it.
Your mortgage consultant can do a strong enough approval, or better yet, talk to the sellers agent - not the sellers. He can assure that your income, debt, and credit are within program guidelines, there are no issues and that they have done a complete professional analysis and have acquired all the documentation that you will need other than title and appraisal for your underwriter.
Your realtor will fill out a Financing Addendum which just states how much you are putting down, that it will be market rate, etc. But no specific details and definitely no income information. They will know if it's conventional, FHA, VA, etc.
This is a new one on me too and I tend to agree with Joyces answer.
Perhaps you're misunderstanding. Does the selling agent want you to be pre-approved by their company lender to verify you are pre-approved to purchase the home. This does occur, but the sellers and the sellers agent should not get your personal information you would deal directly with their lender and go through that lenders pre-approval process. This happens in my area to verify the loan will actually close.
On the otherhand, if you a paying cash for the home, you will have to provide information from the bank that "XXX" dollars in funds are available. There would be no personal information available in the letter from the bank.
Perhaps PA real estate is different. I would get this clarified with your agent before handing over the earnest money deposit and signing the purchase offer. If your agent is not able to give you the information, read your contract. You should be able to speak with their broker.
Who is telling you that you must supply the seller with this information? Usually the banks are loathe to release any information without the buyers permission due to reasons of confidentiality. The buyers do have to supply a financing commitment letter usually to assure the seller that they have the credit and loan for the purchase, but it has limited personal information on it. I agree with my colleagues responses above.
I'm actually going through this right now. I have a seller who resides in AZ and in AZ, the sellers are provided all information about the buyer including credit score, income, etc... and as a seller on a property here in Dallas, he is demanding the buyer allow the mortgage person to provide that info to him... THe buyer did go ahead and agree, but I can't say I like it... I would like to see this AZ form that I've heard so much about. In AZ, it's not "law" per se, but it is actually part of the sales contract.
In Montgomery County, Pennsylvania it is common practice to provide a seller's agent with a Buyer's Financial Information (BFI) sheet. While not required by law, it is a standard of practice in this county and many seller's agents will refuse to consider an offer without it. The principle behind the practice is that a pre-approval is an undocumented accounting of a buyer's qualifications. A mortgage lender will run their credit rating and take their word for their income, job status, etc. The BFI requires a buyer to certify that they have the funds to settle on the home they are making an offer on. The only information they need to provide is that they have enough income/assets to buy the home and that they don't have liabilities which would prevent them from buying the home. If a buyer falsifies information on the BFI, they are in default of the agreement of sale and the deposit monies would be retained as liquidated damages. This is an additional layer of protection for the buyer when making decisions about accepting an offer to purchase. There is no social security number on the new BFI form and as a seller's agent, I never share the BFI with my seller. It simply allows me to advise them on the financial strength of the buyer and therefore, help them make a more informed decision.
An offer is stronger when you show those things. Everyone in this day and age knows a loan officer who will gladly write an approval letter. But the days of giving approval off of credit and verbal income are over. As a seller I would want to know how qualified the buyers were, especially if you were trying to put little to no money down. But I dont think they can require it.
It is not common in Colorado to provide that much information, although smart listing agents are asking for stronger lender letters. I do try to verify if the buyer is bringing a lot of cash to the table, and I am surprised when other listing agents don't ask for the same from my buyer. But they usually don't. As a listing agent, I also speak with the buyer's lender, mostly to see how easy or hard they are to reach, in case they are needed quickly.
It is common practice in Montgomery and Bucks Counties and some agents for the sellers insist on having it part of the offer package. While you can't falsify infomration on it, you only need to disclose the assests and income that will allow you to purchase and close on the house.
I tend to try to get by with the approval letter only, however some pre-approval letters are pretty weak. If I have a buyer prepare a BFI, I instruct them not to put down account numbers.
In Schuylkill County, we never see the buyer's financial info. There is a place on the sales contract to disclose your INTENTIONS as far as mortgage, and then you should attach the bank's pre-qual or pre-approval letter. I would not ask for such information as the seller's agent, unless there was a strong reason to distrust the financing stability of the buyer, for some reason.
It is truly in your best interest to fill out a BFI but don't put any account information on it, just "Checking Account $xxx.xx" etc. It is a real Pennsylvania Association of Realtors form and legal to ask for it filled out.
BFI is an important part of a seller knowing that you are financially capable of buying the house. Unfortunately not all lenders are created equal and while you ought to have a pre-approval to go shopping for a house, it is better accompanied by a BFI when writing an offer.
P.S. A $1000 earnest money deposit sounds pretty low to me, I usually suggest 5%, but I don't know the price of the house you are buying. I guess you will find that out for yourself if it is low or not.
It is common practice to submit this form in MOntCo, ChesCo and DelCo, PA. In fact, the PAR form 'Buyer's Financial Information ' is readily available in every real estate office. It is true that any pre-approval is an undocumented statement, based on verbal information about income, job history, funds available and other real estate owned...all of which impact a buyer's ability to actually be approved for a mortgage and consummate the transcation.
There is no law requiring this. It is better known as a rule of thumb and a risk reductiuon factor for the seller's agent . Should an agreement/offer be submitted without a 'BFI ', the seller is blindly accepting a pre-approval letter from a lender, whose integrity may even be questionable, to make a very important decision...to take the home off of the market. While it is not required, it is advisable. You only need to show enough income and funds to consummate the transaction. You need'nt disclose assets above and beyond what is needed...however a full disclosure gives a seller a picture of your strength as abuyer. As a listing agent, I would advise a seller not to sign an offer without one.
You received some great answers here, and hopefully you've gotten the DEAL SIGNED by now :)
When I am the Seller's Agent, I like to see the BFI (Buyer's Financial Information) as well as the Mortgage Prequalification Letter. The mortgage prequal is too easy to get now-a-days, without much information provided to the lender. If the seller has two offers and one is more financially sound - that would make a big difference on acceptance.
When I am the Buyer's Agent, I give the BFI (Buyer's Financial Information) to them to keep handy. I suggest they check off the "do not share" information box at the end (I think the new form omitted this). I try to present the offer without it (if there are other offers - it gets submitted) - if I'm asked for it - I have the clients return it to me. When representing friends/family that would rather me not see the information, I let them fax it right to the agent.
The BFI is not a required document for the seller. It is a deal breaker inorder to get the deal if there are compeating offers.
As far as a "pre-qualifcation letter" goes is to make sure that it is actuall issused by the Lending institution and not a loan originator. As a matter of fact, my broker will only accept a "pre-qual" letter from the lending institution itself.
There will be some who will balk at this policy but in the long run it cuts down on lost deals at the last minute when a "pre-qual" letter from an originator turns out to not be worth the paper it is written on.
I hope this helps......
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