Why Will An Experienced Real Estate Agent Request A Mortgage Pre-Approval Letter or Proof of Funds Prior to Showing Houses to Buyers?
There is a substantial difference between a Pre-Qualification Letter and a Pre-Approval Letter when shopping for a house.
A Pre-Qualification is a less rigorous initial assessment which includes a BASIC review of your creditworthiness to determine the likelihood of qualifying for a mortgage loan. It is just an initial estimate of how much you may be able to borrow.
A Pre-Approval is substantially more thorough and comes as close as confirming your creditworthiness without a contract in place. The process includes completing a mortgage application and a credit check. The lender will verify all information provided. If you are pre-approved, you will receive a pre-approval letter which is an "offer" to lend you a specific amount and may be good for 90 days or more. A pre-approval letter shows sellers that you are a serious homebuyer and that you can secure a mortgage which increases their confidence that you will close on the purchase of the home.
Why Will An Experienced Real Estate Agent Request A Mortgage Pre-Approval Letter or Proof of Funds Prior to Showing Houses to Buyers?
There are several reasons why a top notch, experienced real estate agent will request from buyers either a mortgage pre-approval letter or proof of funds prior to showing houses.
Saving Time and Frustration for All Parties + Provides Certainty of Ability to Obtain Financing
A pre-approval letter provides a buyer and their agent a range of price they need to stay within. For example, if a buyer is approved for up to a maximum of $400,000 it makes absolutely no sense to be seeing homes that are listed for $450,000 or above. Because the buyer is not able to purchase a home listed over their pre-approval amount, showing homes over the pre-approved amount is a waste of time for the buyer, buyer agent and seller and listing agent. All parties times and efforts are being wasted.
Real estate agents need to make sure that a buyer can obtain financing before showing any properties. Buyers should NOT take this requirement personally, it is simply a must to be taken seriously. Inexperienced real estate agents who show buyers multiple properties without the buyer having obtained a mortgage pre-approval letter are essentially running an expensive tour guide business.
Many Sellers Are Requring a Pre-Approval Letter or Proof of Funds for Showings
Sellers only want serious and ready and able buyers to view their homes, just as we mentioned above. Sellers do not want "tire kickers" walking through their homes wasting their time.
You Will Need a Pre-Approval Letter or Proof of Funds to Accompany an Offer to Purchase
No offer to purchase will be taken seriously if there is no accompanying pre-approval letter or proof of funds (for cash transactions).
Real Estate Agent Safety
A truly serious buyer who provides the agent with a copy of their pre-approval letter provides some peace of mind for safety. Real estate agent safety is top of mind and there are many risk factors for agents involved when showing properties. Working with a buyer who has been pre-approved for a mortgage means there is a verification of identity trail to go back to for the agent's safety.
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