Many potential home buyers ask agents:
"Why am I being asked for a pre-approval letter / proof of funds?"
If you asked, you are not alone. Here we try to offer some thoughts on this subject.
CONVENIENCE
We find that asking our potential clients to show us their proof of funds or pre-approval letter has not been an inconvenience to them, on the contrary, buyers who intend to be successful seem to be very cooperative about this.
CASH BUYERS: Providing the licensed agent with proof of funds in the form of a bank statement (wipe out the bank account number) or a letter from their bank is easy for buyers who have the funds.
LENDER PRE-APPROVALS: Speaking to a lender and providing the lender with documentation needed to produce a strong pre-approval letter is a very important step and greatly beneficial to the buyer. We find that this is the part where most people slow down in their plans to purchase a home, either procrastinating at the thought of gathering documents or afraid they might not really get approved (qualifying is easier than most people think). This is the stage of the process your REALTOR® can’t help you with, however, once you’ve submitted your documents to the lender, the fun part begins for you and your agent, the title company and the lender will do the hard work.
In simple words, once you’ve submitted your documents to your lender, we search for properties, make the phone calls, prepare documents, research each house and its hyperlocal market while you have all the fun, sit back, make wise decisions and buy your dream home.
WHAT DO PRE-APPROVALS SAY ABOUT YOU
We already know buyers will need a pre-approval letter or proof of funds if they want sellers to accept their offer on a home. Experienced listing agents representing sellers are usually quick to verify pre-approval letters or proof of funds before they advise their clients to accept an offer. If you are purchasing a new construction home, the builder will likely expect you to commit a down payment at the moment you reserve the home or the lot you are interested in. Basically, the builder will expect you to show true intention with your money.
A strong pre-approval letter or proof of funds indicates that you are capable to purchase a home up to a specific price and it indicates that you have made necessary efforts to be prepared in the event you decide to purchase a home. It shows you are serious in your dealings, cooperative and respectful of others. When you show that you have done your homework and you are a serious buyer, you may even get some special treatment from sellers.
CONSIDER THE SELLER
We exercise courtesy to sellers by showing their homes to qualified buyers. We observe the inconveniences sellers go through when listing their home for sale and we make efforts to operate in a way that makes our industry better for people trying to buy or sell homes.
Please see examples:
1 - Sometimes we may be asking a mother to gather her children and leave their home for an hour or longer so that a potential buyer can view their home. We find it important to only put sellers through this inconvenience when we have a genuine potential buyer who is truly capable and who is an honest potential buyer searching for homes.
2 - We are asking sellers to leave their home (their private space) so that we can show it to potential buyers (people they don’t know). Because of this, we ask potential buyers to be mindful when visiting homes and we ask that they only visit them if they honestly believe they can purchase the home, should they decide they like it.
"There is nothing wrong with seeing dozens of homes until you decide which one you would like to buy. We feel it's only wrong if you are visiting homes you know you can't buy."
CONSIDER THE BUYER
Who do we ask for a pre-approval letter?
We don't like to make assumptions about who is qualified or not qualified to purchase a home. We ask all potential buyers for the pre-approval letter.
We also discuss the pre-approval letter with the buyer's lender before submitting offers. Our objective is to do everything we can to be successful with the purchase. Speaking to a buyer's lender is part of the teamwork necessary to help the buyer achieve a successful transaction.
Some listing agents will ask for pre-approval letters and/or proof of funds and discuss this with the buyer's agent prior to allowing the showings. This happens more often with luxury homes. We applaud listing agents who protect their clients’ homes in this way and we comply with their requests to prove genuine motive for entering the seller’s home. We ask our clients not to be offended when the listing agent requires proof of funds or a pre-approval letter prior to approving showings. We find it easier for our buyer clients to understand when they put themselves in the sellers' shoes.
We don't like to make assumptions about who is or isn’t qualified to purchase a home. We ask all potential buyers for the pre-approval letter.
YOUR INTENTIONS ARE GOOD
but you haven't found the time to do it yet, or you didn't know the process, or you didn't know a lender...
If you haven't done this yet, it is completely ok. We can help connect you with lenders who will assist you and tell us what your approval line is so that we can allocate our best energies intelligently in the service of your home purchase.
We can pair you up with a few lenders who are likely to have the right loan products and the skills to serve you well. We network with numerous lenders with different products and skill sets.
You can also pick one of our favorite lenders by visiting our mortgage resources page:
YOUR STRENGTH AS A BUYER
The easier you make the transaction, the more appealing you are to the seller and the more likely they are to accept your offer. Your strength as a buyer has other benefits as well, for example, persuading the seller to drop their price.
LAST BUT NOT LEAST: YOUR AGENT
There is a great emotional reward for an agent when he/she crosses a finish line and helps a client achieve their home purchase. On the other hand, there is a great deal of sadness felt by the agent when they feel like their time or skill isn’t respected by potential buyers.
Please be mindful: agents only get paid when clients succeed with their home purchase.
In a commitment to promote safety and ethical behavior in our industry, we don’t show homes without checking identification and a pre-approval letter or proof of funds.
CAN WE HELP IF YOU AREN'T READY?
Absolutely! We are here to help you no matter what part of the process you are in.
It is common for people to start looking for a home before knowing what the appropriate procedure is.
We will be glad to:
Send you links to homes available for purchase so that you can start watching the market activity with us
We may update you with information about these homes
We can help you select a lender that fits your needs
We can help you get ready to qualify for a mortgage in the future
We can help you strategize so that you will become a strong and appealing buyer
We know you have many choices when selecting an agent to help you in this very important transaction. We are thankful you are considering working with us and, if you become one of our clients, we will be focused and fully engaged in helping you achieve your goals.
