Real Estate Blog - What do you think of Pre qualification letters?

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What do you think of Pre qualification letters?

Many Mortgage brokers and loan officers give free pre qualification letter to home buyers .

These letters usually say subject to verification of employment ..... etc

They ask the buyers a few questions and run a credit check. The letter is based on credit check but other things may have not been verified. When I am the listing agent I explain it to sellers.

Sometimes they give pre qualification based on the offer. Sometimes this can backfire because if the seller thinks the buyer can not afford more and there is a better offer on the table , he will not make a counter offer to one he thinks qualifies for a lower price.

I wish buyers can make an application and have everything verified and get a Pre Approval subject to appraisal and they can then just look for a house. But most lenders expect to see an agreement of sale first.

Now that it is going to take longer for approvals it would give first time buyers time to close by the deadline.

Posted by GITA BANTWAL, REALTOR BUCKS COUNTY, PA HOMES on 08/05/2009 06:52 AM

Comments (7)

Pre Qualification in the Regional (Localism) Channel

pre qualification, pre approval

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7 Comments on What do you think of Pre qualification letters?

AUG

Hi Gita -- they simply don't work for me.... they mean very little...especially in this real estate/mortagage climate.... I always insist that my buyers get a pre-approval from a local lender who we can look at eye to eye .. and one who has made sure they know the best program to meet the buyer's needs.

prequalification letters are useless.....preapprovals are the only way to go....

Gita,

Pre-approval letters hold much more weight than a pre-qualification letter. A pre-approval letter means it has been run through an underwriting engine and usually is considered approved with conditions. What most Realtors don't understand is that it will ALWAYS have conditions. Conditions that the home will appraise, conditions that the buyer will keep his/her job, conditions that the debt ratio will be the same, etc. Even with an approval, a customer could go out and buy a new car and put their ratios out of whack. Lenders only totally commit on the day of settlement. Until then, nothing financially can change.

Joan, Thank you.

Kristin, I agree they are not worth much.

Michael, Thank you. I agree with you. But many companies do not give pre -approvals.

AUG

Gita--I agree with the majority pre-approval letter from reputable lender is the only thing I would accept as seller' agent. And even with a pre-approval letter things can change from time it was issued to time of closing. Good luck.

NOV

Hi Gita - long time! I agree with this post. Most of the preapproval letters don't say enough to give the seller the idea that the buyer is truly qualified. If they are not, there are so many delays to encounter if it goes to escrow! Headaches.

NOV

Rosemary, I just got back from India. I lost my Father. It was unexpected . I miss him very much. I had gone for a visit and had to extend my stay after this happened.

Thanks for your comments.

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