Buyer consultations critical to the home buying process. They allow us to determine a buyer’s needs and provide us an opportunity to determine the buyer’s funding source (cash or lender). For buyers that intend to use a lender, it’s important to talk to a lender to determine how much the buyer can spend. This is important so we don’t waste a buyer’s time and for sellers know the buyer is serious when an offer is made. Depending on the lender, your should end up with pre-qualification, pre-approval, or TBD approval.
Pre-Qualification is nothing more than the buyer self-reporting income, assets, and liabilities but none of this is verified. This means the lender has not looked at the buyer’s credit report. I do not recommend sellers accept an offer with only a pre-qualification letter because, quite simply, we have no idea if the buyers can get a loan, let alone close on one.
Pre-Approval is a step above pre-qualification in that the lender reviewed the buyer’s credit report to verify the truthfulness of the information provided and to better determine the parameters under which an even loan commitment may be provided. Most offers are submitted with a pre-approval letter.
TBD Approval is the strongest type of approval you can have short of a loan commitment. TBD Approval means the buyer submitted a complete application, with all supporting documentation, and credit was pulled. The entire application is sent to underwriting for a complete examination. Once a TBD Approval is issued, the buyers have a hard approval of their maximum loan amount/maximum monthly mortgage payment, to include PITI (Principal, Interest, Taxes, and Insurance). TBD Approvals are the best to loan approval to have, epsecially when you’re likely to be in a multiple-offer situation.
Once we have a Pre-Approval or TBD Approval the buyer will be taken more seriously when submitting an offer, and, with TBD Approval, it may help you clinch a deal.