Q: We entered into a contract with someone who wanted to buy our home. The agent representing the buyer presented us with a “pre-qualification” letter from a lender. Today we discovered the buyer was rejected for financing. How can this happen?
A: You allowed the term “pre-qualification” to lull you into a false sense of security. The loan amounts referenced in pre-qualification letters are conditional on verification of income, employment, funds on deposit, credit report, and more. A lender can issue a pre-qualification letter after just a simple 10-minute phone interview with a prospective purchaser.
As a seller, your best vehicle for peace of mind would be a pre-approval letter accompanying the offer to purchase. A pre-approval letter is a firm commitment to lend money and is issued only after verification of the crucial financial items mentioned above.
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