Mortgage brokers need to do a lot more research before they issue a pre-qualification letter to a buyer.  It's becoming a lot more common to see buyers going around thinking that they are valid buyers capable of making a lot of people go out of their way in order for them to try and acquire a house.

When in reality all we have is a wild goose chase.  And the only one who is in a position to determine if the buyer is capable of getting to the closing table is the mortgage broker. 

If the credentials of the buyer are suspect, then the mortgage broker should submit the buyer's application to all the various banks that they are doing business with.  When one of the banks comes back with a conditional approval, then and only then should the mortgage broker send out a pre-approval letter.  Now the buyer can go shopping for a house.

What has happened is the pre-qualification letter is given too freely with the hopes that if all goes well the buyer will get to the closing table.  But when the transaction starts to go south, the mortgage broker has affected a lot of people:

1. The buyer goes around thinking that they are actually moving into their newly purchased home.  They base a lot of their decisions on an occurrence which will never happen i.e. telling their landlord that they are moving, and having the landlord in return renting out their apartment.  Or better yet the buyer might be a seller in another transaction and now more people are involved in a messy situation.
2. The seller has to make plans to move into another house.  Most of time the equity from the first sale is needed to purchase the following house.  Once again we have more people involved in a sticky mess.
3. The realtors who are doing all of the running around making all the necessary plans to try and get the transaction to the closing table.  The mortgage broker works from behind a desk.  It is the realtor who is out in the trenches getting dirty.

It's a beautiful thing when you have a buyer come to you with a credit score of 750 making in excess of $100,000 a year.  This person doesn't need further evaluation in order to issue a pre-qualification letter.  It's the person with a credit score of 620, looking to finance 100% and they've only been on the job for 6 months.  These are the people who need to be scrutinized better.

I didn't write this article just looking at it from the realtor's side.  I'm looking at it from both sides of the fence.  I'm not only a licensed real estate broker but a licensed mortgage broker also.