People who want to buy a home are advised to get preapproved for a mortgage before they begin house-hunting. While that’s a good idea for both parties, it’s not required. If you put your home on the market, be prepared to receive offers from buyers who haven’t been preapproved.
What Does It Mean When a Buyer Is Preapproved?
When a buyer applies for mortgage preapproval, a lender requests information on that person’s income and assets, as well as review the applicant’s credit. If the applicant meets the lender’s criteria, the company issues a mortgage preapproval letter stating how much money the institution is willing to lend the applicant to purchase a house.
The buyer can then present that letter to a seller to demonstrate that they are in good shape financially. The buyer will have to seek final approval for a mortgage, either from the same company or from a different one, before closing on a home.
Why Should You Prefer an Offer From a Buyer Who Has Been Preapproved?
A preapproval letter means that a lender has reviewed an applicant’s finances and found that the person has the financial resources needed to buy a house. If you’re selling your home and you receive an offer from a buyer who has been preapproved, the likelihood that the transaction will go smoothly is high.
It’s possible that a problem, such as a job loss, a drop in credit score or another issue, will arise and cause the deal to fall through. That’s why the buyer will need to secure final approval before closing. Still, you can be relatively confident that a buyer who has been preapproved will be able to purchase your for-sale home.
If a buyer hasn’t been preapproved, that doesn’t necessarily mean that the person can’t afford to buy your house. It just means that a lender hasn’t reviewed the individual’s finances. If you accept an offer from someone who hasn’t been preapproved, the deal may go off without a hitch, or it may quickly fall apart.
If a potential sale falls through, you’ll have to re-list your home. That can cause you to lose valuable time and may make other prospective buyers wonder if there is something wrong with the house or if it was overpriced.
When Might It Make Sense to Accept an Offer From Someone Who Hasn’t Been Preapproved?
If your house has been on the market for weeks or months with no offers, you may want to entertain a bid from a buyer who hasn’t gotten mortgage preapproval. If that individual can pay in cash, the offer may be particularly appealing.
Discuss the offer with your real estate agent, gather as much information as possible and consider the local housing market overall. Your agent can help you figure out if you should accept the bid or if you would be better off waiting for an offer from a buyer who has mortgage financing already lined up.
