Why You Want a Pre-Approved Buyer

You might think no one would make an offer to buy your house if they can’t afford it. But the fact is, most prospective buyers don’t know how much they can afford until they get pre-approved for a loan.

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Typically, there are two ways a buyer will purchase your house: with a mortgage or all cash. Obviously, an all-cash is ideal because you know the buyer has the money to purchase and you don’t have to worry about the sale falling through because they can’t get a mortgage.

Pre-Approved Buyers

The next best thing is a potential buyer who’s been pre-approved for a loan. Here’s why:

You know you’re dealing with serious buyers. To get pre-approved for a mortgage, most lenders require borrowers to provide plenty of documentation that proves their income, tax obligations, credit scores, citizenship status, assets and liabilities, and other financial information. It’s a sometimes arduous process that can take up to a month (longer if the borrower is involved in a lawsuit or has filed for bankruptcy in the past). So it’s usually something only serious buyers do.

You will know whether they can afford your property. When prospective buyers get pre-approved for a loan, their lenders give them a letter that states exactly how much they can borrow. Ask to see the letter and you’ll know right away if they can afford your property.

Don’t automatically assume a prospective buyer can’t afford your property if the amount shown on the pre-approval letter seems low. The buyer could have saved a large down payment or be receiving money as a gift — or they could have asked the lender to show a lower loan amount on the letter so that you don’t know they can actually afford a higher sales price.

You are more likely to sell your home. Nothing is more likely to blow up the sale of your home than a buyer who can’t get a mortgage. During mutual acceptance, the buyer will include a financing contingency which grants them a limited amount of time to secure a loan. If you only entertain prospects with pre-approval letters, you will know that the financial contingency will be easily resolved.

You might be able to close quicker. As long as the buyer’s financial picture hasn’t changed dramatically since pre-approval, they should receive final approval for their mortgage sooner than others. If the buyers haven’t been pre-approved, the closing could drag out for weeks while lenders detangle any of the financial issues they’re concerned about.

If you aren’t comfortable asking for buyers’ pre-approval letters upfront, ask your real estate agent to do it for you. A good agent won’t feel squeamish about being direct, as this is just part of the business.

Pre-Qualified Buyers

When reviewing the letters buyers have provided, make sure that they are, in fact, pre-approval letters. Some people get “pre-qualified” for a loan instead of “pre-approved.” And any real estate agent will tell you, pre-qualified is not a guarantee the buyers can even get a loan.

To get pre-qualified all prospective buyers have to do is call up a mortgage company, tell them what they make in a year, let them run a credit report and then the lender will estimate the largest loan they will qualify for. But that doesn’t mean they’ll actually qualify for that loan because the lender still needs to verify that everything they’ve been told is true.

Sometimes people don’t even know certain events from their past (like lawsuits) are a problem.  And then when they apply for a loan, it can take months to prove to the lender that they don’t have any outstanding obligations. If you’re unsure of what you’re looking at, ask for the help of a professional mortgage officer or your real estate agent.


The moral of the story is: cash is king, but in the absence of all-cash offers, you want to look for buyers who have been pre-approved for a loan. It will give you peace of mind to know that with all of the moving parts that go along with a home sale, the buyers’ ability to afford your home isn’t one of them.

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