Why do I need a pre-qualification letter?

It's important for buyer(s) to have this letter before starting their home search. To get one, you submit a basic application (online, in person, or over the phone) for a mortgage with a lender (unless you are paying cash, in which case you'll need to provide "proof of funds".) It's been covered in my Realtor training extensively and the reasons vary depending on whose lens you are looking through, so I’ll share it from all viewpoints:


Buyer: The buyer’s time is valuable and they are looking to the Realtor to give them professional advice. The buyer doesn’t want to waste time looking at homes, if they don’t know how much they qualify for, IF they qualify, and an honest estimate of the expenses involved. Also, in a competitive market, a buyer may find the house of their dreams, but find themselves unable to submit an offer without the lender letter. Meanwhile, someone else will submit an accepted offer before the buyer has time to hear back from their lender OR worse, unable to get a loan for it and no other house will measure up causing disappointment. A Realtor would do a disservice to the buyer, to not ensure they have their best foot forward and obtain an estimated payment for a mortgage (as interest rates fluctuate.) Be in the know!


Buyer Agent: Safety, time, and ethics. Realtor safety is paramount. Many Realtors do not know the person(s) they are working with and a lender letter gives some peace of mind. Many Realtors have lost their lives in recent years for failing to go this extra step. Also, Realtors are not paid by their firm for their time showing property; income comes from closing homes. It’s not a good business practice for Realtors to spend countless hours showing property to buyers that might be unable to buy. This costs time and money; an experienced Realtor will balance this investment of time with a qualified buyer. Ethically, a Realtor shouldn’t be showing houses without the lender letter. Many sellers require that the buyer have this step taken care of before a Realtor schedules an appointment to show their home.


Seller: The seller is asked to leave their home for all showings, giving the buyer time to view the property. This window of time could be 30 minutes – 2 hours, depending on the appointment. Sellers must prepare for the showing (clean, make beds, etc.), make arrangements for pets, children, work, meals, etc. to accommodate. Also, the seller may have valuables such as electronics, art, medications, etc. and they want qualified buyers touring their homes to curtail risk.


I’m sure this helps you to see why this is required - preparation is everything in securing the home of your dreams!


As an extra step, you’ll also want to get pre-approved when you have more time. This basically means all of your assets/debts are verified by the lender and it makes you a stronger buyer, especially when competing against other offers.