What Is a Qualified Buyer?
The term "qualified buyer" is one of the commonly used terms in the real estate profession. When a real estate agent, or other person involved in the process, refers to a qualified buyer, it generally means that the buyer has already been deemed by a bank to have the financial means to purchase the property in question. This may, however, mean that the buyer has been pre-qualified or pre-approved, which are actually two very different things.
Often, before a buyer ever starts actively looking for a property to purchase, he or she may want to have a general idea about how much a bank would loan him or her in the form of a mortgage. Clearly, this can make the process much easier for the buyer. It also makes the process easier for the real estate agent as he or she knows what price range to stick to when showing the buyer properties. It also makes an offer to purchase more appealing to a seller when the agent is able to add that the prospective buyer is a qualified buyer.
A buyer may ask a bank for a pre-qualification. Pre-qualification is relatively simple, quick, and free, in most cases. A buyer may generally pre-qualify over the telephone or online by simply providing the lender with a general picture of his or her financial status, such as income, debts, and what he or she believes his or her credit rating to be. In most cases, the lender uses only the information provided by the prospective borrower in making a pre-qualified decision; however, based only on this, a buyer may be considered a qualified buyer when he or she may not actually have the means.
A pre-approval, on the other hand, in much more in-depth and often requires the buyer to actually apply for a loan and pay the loan application fee. A lender will typically verify the information provided, as well as run an official credit check when making a pre-approval determination. A qualified buyer who has actually received a pre-approval is really what the term qualified buyer is intended to describe.
While a buyer who has been pre-qualified may give him or her some idea what loan limit he or she will qualify for, there is no guarantee that the lender will approve a loan at all since the pre-qualification was based entirely on information offered by the buyer. If any of the information was inaccurate, intentionally or mistakenly, then the lender may decline to loan any money at all. For this reason, most sellers prefer to work with pre-approved qualified buyers whenever possible.
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