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What is a Pre-Qualification letter? Why is it Important when selling your home? There are a few reasons that might surprise you. Watch below to find out about the pre-qualification letter.
In the ideal offer scenario, a buyer’s pre-qualification letter or actually proof of funds if they’re paying cash, will be presented at the time of the offer. Sometimes though, the buyer’s pre-qual letter may not accompany the offer, whether due to the offer being made over the weekend or simply the timing of the offer. If the prequel is not presented along with the offer, then the listing agent and the seller absolutely need to verify that on whatever date the contract specifies, the pre-qualification letter is due.
It has been received, both seller and listing agent should review it carefully to ensure that it reflects the buyer is pre-qualified, based on the terms outlined in the offer.
Every once in a while, something will be noted in the pre-qualification letter that was not specified in the offer. For example, the pre-qual may specify that the buyer is required to sell their current house before they’ll qualify to buy yours. It may state that their credit score needs to go up a certain number of points as a condition of approval, or the lender might not have the buyer’s completed application or the buyer’s tax records or proof of income documents and still needs to review them. It is very important for the listing agent and the seller to read, review and understand the pre-qualification letter as it relates to the contract.
Anytime a seller’s lucky enough to be entertaining multiple offers, it is important to note, an offer which is accompanied by a pre-qualification letter is a much stronger offer than one without. When a mortgage lender issues a pre-qualification letter, they are typically stating that the buyer has applied for a mortgage, that they have pulled a credit report on the buyer, as well as look at items like taxes, income, other debts and have calculated the debt to income ratio.
Lenders almost always have a clause in the pre-qual, stating that the home has to appraise for a value not less than the purchase price and it’s contingent on there being no changes in the buyer’s information before closing.
These are just a few examples of how pre-qualification affects a seller. I can’t emphasize enough, the value of working with an experienced agent when your selling your home, someone who can guide you through each step of the process. We want to set you up for selling success.