One of the biggest headaches any home seller can experience is working with an interested buyer and negotiating a sales price, only to find days or weeks later that the buyer is unable to obtain a mortgage. That's precious time wasted and frustration to boot. Here's how to sort the buyers from the lookers.
Lenders aren't giving mortgages to just anyone these days. The Wall Street Journal noted earlier this year that loan originations have dropped dramatically since 2007, with approvals dropping 30 percent for applicants whose credit scores are above 780 and at a much steeper rate for those with lower credit scores.
As a seller, you’ll want to focus your attention on those who can afford your home and can get the necessary mortgage. Monitor the latest mortgage rates and lending news at our Mortgage page, with fresh content delivered daily by LendingTree.
When you are contacted by a potential buyer, be prepared to interview the buyer as much as they are inteviewing you about the house. Your goal is to ensure that the buyer has the financial wherewithall to qualify for a mortgage that, with the buyer's down payment, matches the appraised value of your house.
Questions to Ask
"Are you pre-qualified for a mortgage from a lender?"
If the answer is no, ask the potential buyer to obtain a pre-qualification before setting up a time to see your house. If the answer is yes, ask the buyer for a copy of the letter from their lender confirming that status. Then, ask this follow-up question: For what mortgage or purchase price are you prequalified?
Pre-Qualified vs. Pre-Approved
Being pre-qualified means that the potential buyer has a rough estimate from a lender as to how much mortgage they can afford. Being pre-approved means that a lender is ready to accept this buyer's mortgage application up to a certain loan amount, because the preliminary credit check, income verification and other initial steps have been completed. Read more about pre-qualified and pre-approved mortgage letters.