Dear Seller: Pre-Qual or Pre-Approval Letter?

Hooray that you finally know you should talk to your lender before shopping for a home with your chosen Realtor. You’ve got a piece of paper that says you’ve done your homework first, but what should the seller make of it?

Lots has been written about home loan pre-qualification versus home loan pre-approval. You could split hairs about what each term means, and every expert has an opinion. But all a prudent seller wants to know is that once you are under contract you can close the deal.

So what should a buyer’s “pre-letter” include? The seller wants to know what loan type you’ll use, since different loans have different property standards. For example, if the septic system has failed and the seller doesn’t want to pay to replace it, a conventional loan might not care but other loan types would.

The buyer’s credit score is interesting, since most loan programs today require a qualifying credit score higher than 620. If the pre-letter notes a credit score below this number, the seller might wonder if the credit approval is real.

The buyer’s down payment and debt ratios might be notable, but if the credit approval works the seller shouldn’t really care. How would the seller know what else is in the loan file that might offset those figures?

Something the seller should love to see is the actual automated underwriting findings, which indicates that the buyer’s information has been run and the results are “approve/eligible”. Bear in mind it’s still a machine finding, and if what was input doesn’t verify, then the results are only worth the paper they were printed on.

Then what’s the best way a seller knows who is a strong buyer? It’s easy. The reputation of the loan officer is paramount to knowing if the transaction will close. Has the Realtor worked with this lender before? Does the escrow officer have any experience with them? Any online reviews available? Sellers should do a web search for the Nationwide Mortgage Licensing System and Registry (NMLS) and check that database for the loan officer’s employment history and any complaints filed. Every communication from a loan officer should have their NMLS reference number listed.

There’s enough stress associated with selling your home. Make it easier on yourself by choosing a buyer who works with a seasoned mortgage adviser who has a sterling reputation.

Tammy Engel is your local Mortgage Advisor and has been working for your best interest since 1990. Contact her at 661/822-7325 for help with purchase, refinance, and reverse mortgage.