Buyers can misunderstand the mortgage qualifying process. A good REALTOR® will always ask if the buyer has been pre-qualified or pre-approved for a mortgage with a lender.
Proper prequalifying gives buyers the highest mortgage amount they qualify for. This is added to their downpayment to arrive at the maximum affordable house price.
Armed with this information, buyers can now confidently look in a price range capped to their maximum. A buyer with a $25,000 downpayment who qualifies for a $200,000 mortgage can look at homes valued less than and up to $225,000 with assurance. Sounds simple enough right?
Yet a number of complications can arise.
1. The lender has not properly prequalified the buyers. The buyers state what price they think they can afford and the lender tells them to go ahead and come back once they have an accepted offer. They now go home hunting, negotiate an accepted offer and revisit the lender who now goes through the approval process. Apologetically the buyer is now told they don’t qualify: low credit score, insufficient income, and other credit issues.
2. The lender properly qualifies the buyer but approval is conditional. Within days of applying for a mortgage buyers are told they are approved. Happily they call their sales representative and remove their mortgage condition from the offer. The approval, however, was subject to a property appraisal. After inspecting the home, the appraiser evaluates the home for $5,000 less than the offer price. The buyers now have to come up with the additional money or try to renegotiate the price--a real problem.
3. Other approval conditions that can be overlooked: Approval is subject to: receipt of income verification from employer, confirmation of 2 years employment history, proof of downpayment or closing costs, receipt of divorce/separation agreement to confirm no alimony or support payments, proof of a debt being paid off from buyer’s own resources, approval from default insurer.
A good REALTOR® asks helpful questions to insure the buyer has been properly preapproved or prequalified. He’ll also verify with the lender whether the mortgage condition in the Offer to Purchase can be removed before risking doing so. It’s a “duty of care” that can eliminate potential problems--legal or otherwise.
Buyers should seek help from a REALTOR® who cares enough to ask the qualifying questions, takes a proactive role and works to explain and anticipate potential issues. Find a REALTOR® you trust and cooperate in giving him or her information needed to help you achieve your home purchase without a hitch.
A cooperative spirit of trust between buyer and REALTOR® can result in a happy home purchase and sale.