Pre-approved vs Pre-Qualified Buyers

Pre-approved vs Pre-Qualified Buyers

Are you interested in selling your own Silicon Valley home?   Would you be tempted to list the home yourself?

Well, you are not alone since paying 6% full commission amount to more than $80,000 in commissions.  In fact, 59% Marin County home owners expressed interest in selling their own home.  But if you do, then you have to be prepared to screen unqualified buyers for your FSBO.

In fact, telling the difference between pre-qualified and a Pre-Approved buyer is the biggest tip.  So, let’s see what each of these terms mean:

Pre-Approval:  A pre-approved buyer is the person who has gone through the complete loan application process.  The application for a pre-approval will require borrower’s full employment history, financial information, assets and other real estate holdings.    The bank or mortgage broker who is approving your buyer, completes the employment and asset verification before they issue the buyer his/her approval.

The final step in the Pre-Approval process involves the affordability calculations which determines how much house your potential buyer can afford.  Once mortgage loan application is underwritten, then the bank will issue a conditional approval with a maximum loan amount.

Pre-Qualification:   Unlike a Pre-Approval, a Pre-Qualification is a letter issued by lenders without requiring a mortgage loan application from the borrower.  Mortgage brokers, Correspondence Lenders and loan officers typically issue these Pre-Qualification letters.  As a FSBO owner you should ignore these kind of buyers since there is no guarantee that they can afford the mortgage payments to buy your home.

These pre-qualifications require no due diligence on the buyer’s employments, financial assets and reserves.   But if you decide to continue working with these kind of buyers, you should contact the Mortgage lender or Loan Officer that has been identified in the pre-approval.  You should then insist on getting a loan application completed for your For Sale By Owner (FSBO) buyer.

Feel free to Contact Us if you need help identifying qualified buyers for your FSBO.