Skip the pre-qualification letter and go straight to the pre-approval

By
Real Estate Broker/Owner with Cornerstone Business Group Inc 0225086119
https://activerain.com/droplet/4clc

Buyers, skip the pre-qualification letter and go straight to the pre-approval letter. A pre- qualification letter is the minimum you will need to put a contract on a house, but you would be wise to skip that process altogether and sit with a lender and get pre-approved for a loan.

In the post-2008 real estate meltdown, home-sellers and banks selling foreclosures and short sales want to know that you're truly qualified to buy a property before they agree to accept your offer. There is no reason to take a property off the active market if the buyer isn't actually qualified to buy it. 

A pre-qualification is likely your lender's first contact with you. During that conversation, the lender will make an assessment of your buying power through a series of questions. Based upon what you tell him/her, he or she will make a preliminary assessment of your financial viability. Granted, it is only a preliminary assessment. 

The pre-approval will require documentation, confirmation of income, savings and the capacity to buy. It's the next step in the home-buying process, but you can make it the first step with your lender. When a real estate offer to purchase is delivered to a home-seller or a bank, the difference between the two letters will be big. A buyer who can prove he is qualified will be granted more consideration than one who might be able to buy. 

So, do yourself a favor and skip the pre-qualification letter and go straight to the pre-approval letter. If the market heats up and bidding wars become the norm, you'll be ahead of those bidders who are only offering similar contracts with a pre-qualification letter only.  

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Ambassador
2,839,116
Anna Banana Kruchten CRB, CRS 602-380-4886
Phoenix Property Shoppe - Phoenix, AZ
Arizona's Top Banana!

Absolutley Mike. Sellers will want to see that the buyers can actully close the deal and have the cash to close. Totally different times and we've all shifted to what works and an approval is what gives the buyers an edge up these days.

 

Featured in BananaTude

 

Feb 24, 2014 04:04 AM #1
Rainmaker
1,542,866
Mike Cooper, GRI
Cornerstone Business Group Inc - Winchester, VA
Your Neighborhood Real Estate Sales Pro

Thanks, Anna and the tudes. 

Feb 24, 2014 04:07 AM #2
Rainmaker
494,613
Steven Nickens
Elite Pacific Properties Maui - Wailea, HI
R(S)GRI ABR, Maui Real Estate Hawaii

Good advise.

Feb 24, 2014 04:41 AM #3
Rainmaker
1,542,866
Mike Cooper, GRI
Cornerstone Business Group Inc - Winchester, VA
Your Neighborhood Real Estate Sales Pro

Thanks, Steven. It has come up in my office multiple times lately.

Feb 24, 2014 04:50 AM #4
Rainmaker
2,704,764
Lisa Von Domek
Lisa Von Domek Team - Dallas, TX
....Experience Isn't Expensive.... It's Priceless!

Hello Mike,

I don't even accept a pre-qual letter, if an offer is presented it must include a pre-approval.  I even provide the minimum parameters it must meet in the listing information so that buyers agents are aware...just in case.

Feb 24, 2014 05:25 AM #5
Ambassador
2,769,103
Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

Hi Mike - You're completely right. I can't really remember the last time I even saw a pre-qual, but I know it was a lot longer ago that it was even considered useful at all. Total waste of trees.

Feb 24, 2014 06:26 AM #6
Rainmaker
1,542,866
Mike Cooper, GRI
Cornerstone Business Group Inc - Winchester, VA
Your Neighborhood Real Estate Sales Pro

You're a smart lady, Lisa. 

I rarely see them, but one bit me in the keister this past week. 

Feb 24, 2014 06:34 AM #7
Rainmaker
1,223,014
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Mike:  When Buyers are truly serious and ready to pursue and view homes, they definitely need to secure a Pre-Approval.  Pre-Qualifications serve a purpose .. but it's much earlier in the process as someone is discovering their personal commitment to buying.  Each serves a purpose ... but when it's crunch time .. go for the Pre-Approval!  Nothing less will serve the purpose ...

Gene

Feb 24, 2014 07:18 AM #8
Rainmaker
1,542,866
Mike Cooper, GRI
Cornerstone Business Group Inc - Winchester, VA
Your Neighborhood Real Estate Sales Pro

Gene, I will put you down as a yes on pre-approvals. 8=) Spoken like a true pro.

Feb 24, 2014 07:29 AM #9
Rainmaker
1,143,921
David Shamansky
US Mortgages - David Shamansky - Highlands Ranch, CO
Creative, Aggressive & 560 FICO - OK, Colorado Mtg

AGREED. We quit giving out Pre-Qualification Letters a while back. THey are basically a letter that states, I probably have checked credit (if lucky) and thats all. For us we go beyond a full tri merged credit report and also obtain income and asset info so our approvals always close

Feb 24, 2014 12:42 PM #10
Rainmaker
1,542,866
Mike Cooper, GRI
Cornerstone Business Group Inc - Winchester, VA
Your Neighborhood Real Estate Sales Pro

You're a smart guy, David. 

Feb 24, 2014 12:57 PM #11
Rainmaker
2,882,227
James Dray
Fathom Realty - Rogers, AR
Exceptional Agents, Outstanding Results

I always ask for a pre-approval letter and I hardly mention the pre-qualified letter.  Good data thanks

Feb 24, 2014 06:39 PM #12
Rainmaker
42,678
Pat McCormick
Long and Foster Manassas - Manassas, VA

Mike, so true.  An offer with only a pre-qualification letter is really very weak in the seller's market in our area.

Feb 24, 2014 11:59 PM #13
Rainer
1,756,848
Conrad Allen
Re/Max Professional Associates - Webster, MA
Webster, Ma, Realtor

You are so smart looking for the pre-approval letter Mike.

 

Feb 25, 2014 07:05 AM #14
Rainmaker
1,542,866
Mike Cooper, GRI
Cornerstone Business Group Inc - Winchester, VA
Your Neighborhood Real Estate Sales Pro

You're a smart guy, James.

Very weak, Pat.

Nah, this is a blog I just posted on my WP site, and thought it might be something all of the RE wizards on AR would agree with.

Feb 25, 2014 07:07 AM #15
Rainmaker
572,468
Peter Mohylsky, South Walton
PrimeSouth Properties - Santa Rosa Beach, FL
Let me help you find your path to the beach.

It varies from state to state but good advice here for the newbies.  

Feb 17, 2019 01:17 PM #16
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Mike Cooper, GRI

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