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What kind of questions do you ask to prequalify buyers to make sure they're a good buyer?

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April 02 - Parker
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Every situation is different.  Most Realtors will pre screen over the phone with questions like: Are you working with a lender? Do you have a pre approval letter?  I do it a little different because all buyers are different.  I like to meet with buyers either at my office or at a property.  At this point I ask questions and listen.  Some buyers are ready to go immediately some are not but all are worth my time and energy.  My job is to find homes for buyers, whether it be in a month or a year.  I have put several buyers into a well managed credit clean up program and sold them a home 6 months to a year later.  These transactions are usually the most rewarding for my team and I. Also,  In Colorado there are several oil field workers that are 1099 contract laborers who make very good money but don't qualify for a traditional mortgage. It is always great to find an owner finance deal for them or an out of the box investor willing to carry mortgages in their portfolios. 
Of course It is always great if the buyers already have a letter from a lender or are paying with cash but in this day and age coming out of the recession there are more people that need a little more attention to get them into home ownership.  So, I will find out as much as I can about a buyer in order to place them with the right lender, credit repair or owner finance situation. To me a buyer isn't always black and white, there is usually a way to get most things done.
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July 10
In general, no matter if you are the Seller or you're chatting with a Real estate agent about purchasing property, the foremost question will usually be: Are you currently working with a lender/mortgage broker and do you have a pre-approval letter from them?  

If the answer is no, then you might ask or be asked: How are you planning to fund your real estate purchase? Lately, I am seeing more cash buyers in the market and usually those clients are willing to provide proof of funds and contact information in order to verify the monies. 

If the Buyer does not have a funding source in place, that buyer would need to contact a lending institution to begin that approval process. Most good Realtors have solid lender contacts to refer to Buyers. Important note here: not all lenders are able to process the Buyer's loan to successful completion so definitely do your due diligence with the loan provider as well. 

Best advice: Find an full-time Realtor to work with and you'll enjoy a much better transaction....hands down!  With a fast-paced real estate market like Denver's, you want to be on top of the game, not behind it. Makes sense right?

 

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July 09
Couldn't agree more with David on the lender selection opinion, can't tell you the countless deals we have had to pick up mid stream after some of these lenders that are ''ENGINEERED TO AMAZE'' after one of their phone officers dropped the ball and messed up the transaction in one way or another.
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April 02
I don't interrogate prospective buyers, I talk to them, and I try to leave the conversation with the knowledge of what their time frame is and what steps they've taken to secure financing. If they haven't yet talked to a lender, I will refer them to one.
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April 02
A 'pre-approva"l letter from a lender is normally sufficient, this is different from a "pre-qualified" letter which is normally unverified.
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April 02
Wet Dawgs is correct that a seller isn't directly allowed to ask the seller any sensitive questions about income, assets, job, etc.   So you are at the mercy of relying on the pre-qual letter that they provide you.  

However, not all lenders are created equal... online lenders, and mortgage brokers (who do not underwrite the loan themselves onsite) tend to have less control over meeting the deadlines in the real estate contract, and a weaker grasp on the laws and protocols in Colorado.  For instance, in Colorado we "table fund" our purchase closings on the day of closing.  This means the buyer receives the keys at closing, and the seller receives their sale proceeds at closing.  Many other states close "in escrow" which means that no one gets funds, or possession on the day of closing.  Many out of state mortgage lenders aren't accustomed to "table funding", because they are used to closing in escrow... and tend to botch the closings they attempt in Colorado.  So, beware of a prequal letter presented from a broker, or online lender.  Letters issued by local, Colorado based "Mortgage Bankers" are typically considered a safer bet.

Second, not all loan types statistically have the same odds of closing successfully.  This is why "all cash" offers are considered the safest, followed by "conventional" loans accompanied by a large down payment (the larger the down payment, the less scrutinized the file is in underwriting).   If you can't get a cash or conventional offer, then the next safest offer would be from a government loan, where the buyer has their own down payment to present (as opposed to a buyer using a government grant program to "gift" them the down payment").  Of course this leaves the least desirable buyers, who have no down payment money, and are utilizing grant funds.  Not to say these loans won't close (I sold a few homes last year to buyers using grants), but statistically they are considered the highest risk to the seller. 
The exception to this would be a VA loan.  VA loans are issued to honorably discharged Veterans, and require $0 down payment.  So, the fact that a VA borrower brings no down payment money isn't automatically an indicator of a weak borrower.  In fact, typically the opposite. 

Good luck!
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April 02
I have a buyers consultation and ask if they have already been preapproved by a lender - if they say yes, I ask for the lenders information so that I can get the preapproval letter -- if they say no, I ask if I could introduce them to a lender or two to answer their finance questions. My buyers are always preapproved, not prequalified before I show them homes.
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April 02
Profile picture for wetdawgs
Are you asking from the seller's point of view?    While a lender needs to know income and assets (including money in the bank), it is not any of the seller's business.  
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April 02
Have you been pre-qualified and who is the lender?



Have no idea what Tim below is talkiing about below, it is none of the sellers' business how much they make or what their debts are.
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April 02
Thanks for posting your question on ZIllow.com!


Make sure they have CURRENT  pre-approval.  That should be sufficient.    
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April 02
Everyone is different and everyones situation is the same but young or old, first time buyers or seasoned movers, a starter fixer upper to a multi million dollar home it is a question that needs to be handled tactfully.  I cater my questions carefully to the particular client and  I use some of the phrases already given by others here.  I will ask about the buyers motivation to move and that starts the conversation towards  finances. 
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April 02
  1. How long have you worked with the lender your buyer is using?
  2. Has the lender verified cash to close?
  3. Has the lender checked the buyers' credit?
  4. Has the lender run the buyer through automated underwriting?
  5. Has the lender verified income?
  6. Does the buyer have stable employment?
  7. Has the buyer had a bankruptcy?
  8. Has the buyer had a short sale?
  9. Has the buyer had a foreclosure? If so, when was the title to the property transferred out of the buyer's name?
  10. Have both of the buyers physically seen the home in person?

In addition to getting answers to these questions, I also get a copy of:

  • The buyers' lender letter
  • The contingency contract
  • The buyers' pre-approval letter on the contingency contract
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April 02
Good buyer as in qualified?  I leave that to a mortgage professional, not up to me!  If they are not willing to speak with a mortgage professional then they aren't ready to buy NOW. That doesn't mean they won't be soon enough, so don't write someone off too soon.  BUT, don't make appointments to show them tons of places if they are just browsing; that is what open houses are for :)

Good buyer as in motivated?  That is where you find out if they will waste your time or not.  I ask their current living situation, are they comfortable with it.  What is Plan B if they don't find a home?  Would they be happy with Plan B?  If you listen and ask follow up questions you can get a great idea of how badly they need your services.

 
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April 02
Profile picture for sunnyview
What's your credit score?
What kind of work do you do?
How long have you been at your current job?
How much do you plan on putting down?
What kind of loan are you planning to get?
Have you talked to a lender to see what you qualify for?
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April 02
How much they earn
How long have you had the job
any credit history problems
debts
cash in the bank


That's about all you need for a pre-qual. It's just a guess from a loan officer that they think you can get a loan.
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April 02
 
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