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Not that I have had problems to date selling houses with a letter or without a letter, but I sometimes question the real value of the letter when presented to me by a prospective selling agent.
A pre-qual has zero value because it's based on verbal discussions with the lender only.
A pre-approval, when done correctly, has a lot of value because it means the lender has pulled credit, verified income via checks stubs, looked at tax returns, etc.
When I get an offer on a listing, I ALWAYS call the lender to make sure they did verify everything and review all documents before issuing the pre-approval.
I agree with Nina. Pre-Qual means nothing, absolutely nothing. It's usually just someone picking up the phone and telling a good story to the lender. With a Pre-Approval, the story is checked out and verified. Things like child support, Alimony, and Student Loans might be left out of a verbal conversation, but will come up when things are verified. Those expenses could drastically change someone's approval amount as it's all based on debt to income ratios.
Even a pre-approval is no guarantee. It just means the buyer is financially qualified to make a purchase at that price point. The lender still has to evaluate the house to decide if they want to lend against it. It's always a problem when a house does not appraise out. Of course, the buyer's financial qualifications can change in a heart beat as well. Last year, I had a buyer get laid off in the middle of a sale. He no longer qualified for the mortgage and voided the contract using his financing contingency.
Would it make more sense for a "looking" client to only need a pre-qual letter (or nothing) and for a pre-approval to be submitted as part of a strong offer?
Would it make more sense for a "looking" client to only need a pre-qual letter (or nothing) and for a pre-approval to be submitted as part of a strong offer?
Anyone who wants to buy a home should have a pre-approval letter. Sometimes, you can't get one in an hour and if you want your offer to be taken more seriously you'll need it. You never know when you'll happen upon that "right" house and you need to be ready to go when you do.
Anyone who wants to buy a home should have a pre-approval letter. Sometimes, you can't get one in an hour and if you want your offer to be taken more seriously you'll need it. You never know when you'll happen upon that "right" house and you need to be ready to go when you do.
I only had a pre-qual letter. There was no time to go further and get a pre-approval before I found a house I loved and made an offer that was accepted. If my offer hadn't been accepted, I would have continued with the pre-approval process while looking for other houses.
If I were a seller in a multiple offer situation, a pre-approval would be stronger than a pre-qualification. If a pre-qual is from a reputable lender, then I feel a little better about it than some fly-by-night lender no one has ever heard of.
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