You Really Think You Are Pre-Qualified!
“My real estate agent said I need a pre-qualification letter, and I was wondering if you could provide one to me within the next hour so that I can make an offer on a property.”
It is very rare when a borrower has pre-prepared all of the paperwork required to demonstrate their ability to repay the mortgage they are seeking.
A pre-qualification letter is absolutely useless, unless it confirms that the preparer has verified the prospective borrower’s income, liquidity and credit. This would include at least the receipt and review of the following, as applicable:
- last 2 years of tax returns, W-2’s or 1099’s
- last 30 days of paystubs
- last 2 monthly bank and retirement account statements
- tri-merge credit report from the 3 national credit reporting agencies
Without the above, there is no way a lender can properly confirm that a borrower is truly pre-qualified.
Real estate agents showing “pre-qual” letters to sellers that do not confirm the above are likely wasting their and their seller’s time.
Ideally, an “Approve/Eligible Finding” should also be obtained from government-approved software, evidencing that a greenlight was received from FannieMae or FreddieMac to proceed with a bona fide mortgage loan submission.
Many people are in such a rush to make their offer, they avoid mortgage professionals who take the time to diligently ensure the buyer is a capable borrower. Instead, some buyers actually call around until they find a lender who accepts verbal confirmations alone – and then a letter is issued that usually does more harm than good.
Here’s the Point:
You can get a mortgage pre-qualification letter in less than 10 minutes – but they are not worth the paper they are written on.