In this current "buyers market", everyone is fighting to get their home sold. If a person contacts you to see your home, you may be tempted to drop everything to show your home to anyone and everyone who is interested. But you could be making a huge mistake by doing this without making sure they can afford your home first. Don't be afraid to ask if they have a "Pre-Qualification Letter" from their bank. If a buyer doesn't even know if they can afford your home, then everyone's time is being wasted.
As a seller, you don't want to allow just anyone to come tour your home. That could also be very dangerous. You want to make sure they have taken steps with their bank to see if they are qualified. Requiring a Pre-Qualification letter in advance is the standard today. Even Real Estate agents require seeing a letter before showing homes to anyone.
People often mistakenly interchange the phrases Pre-Qualified and Pre-Approved, but there is a major difference between the two that you need to understand. Even buyers believe they can afford a home because they have been "Pre-Qualified" for a loan but that is not always the case.
Getting pre-qualified is the first step in the mortgage process. It's a fairly simple and fast process. A borrower provides his bank or lender with his overall financial picture, including income, debt, and assets. The lender runs some calculations and gives an idea of the mortgage amount for which the borrower qualifies as well as approximate closing costs and what the monthly payment will be.
Pre-qualification can be done over the phone or on the internet, and there is usually no processing fees involved. Pre-qualification does not include an analysis of the borrower's credit reports.
The next step is getting pre-approved. It is more involved and usually requires an application fee upfront. Borrowers will complete a mortgage application and allow the lender to perform credit reports to determine exactly how much mortgage the borrower can afford and for which he is approved. At this point, the borrower may also be able to lock-in on a specific interest rate for a determined period of time.
The lender will provide a conditional commitment in writing for an exact loan amount, allowing the borrower to look for a home at or below the approved amount. If a borrower is pre-approved, you as a seller know he is one step closer to obtaining an actual mortgage so this will shorten the time needed to close on a property. You, as a seller, know that this person is serious and ready to make a purchase.
Don't be afraid to ask if they are pre-qualified for a loan and don't entertain buyers who could never afford your home. Learn to ask people about their finances before you begin negotiations. Research their financial security. Research their financial security. Find out what is motivating the buyer. Has their lease expired? Do they need to move quickly? Ask about their job. But don't give away too much information about yourself. Don't let the buyer know that your job is relocating you 500 miles away or that you can't buy that beachfront home until you sell your current home.
Watch out for callers who ask if you'll take no money down or carry the mortgage, especially if they don't seem to be interested in the amount of square footage in the house or other important information. They may have credit issues. If they don't have a pre-qualified mortgage, you may find yourself tied up for months in a contract that eventually goes nowhere.
Don't admit a stranger who knocks on your door into your house. Insist on an appointment time and as a safety precaution - a phone number, so you can "Call to confirm the appointment."
Showing your home to passerbyers potentially opens the door to a lot of potential risk such as a thief who may want to see if you have any valuables or see how you have your home protected, with locks, alarms, etc... They're not out to buy your home; they're out to rob you. If they truly are a home buyer who is interested in your home, they will respect your request and will make an appointment to see your home.
It's strongly advised to have more than one person at the house during your showing. Allowing strangers into your home can possibly be dangerous. Use caution and trust your gut.
Tags: Prequalify mortgage, Prequalify first time home buyer, Prequalify new home buyer, asking buyer for mortgage letter
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