The Barrington Financial Group, Inc.

Question 1. What does it means to be pre-qualified?

Answer:  Being pre-qualified is probably one of the most misunderstood terms used in the mortgage and real estate industry today. When a lender tells a consumer he is pre- qualified for a loan, many consumers believe they are actually approved for the loan.  Not so.  What does pre-qualified actually mean?  Pre-qualified means that the loan officer has determined from information received both from the consumer about their income and employment, and credit reporting agencies about the client?s credit history, that it appears the client can qualify for a loan.  It does not mean the client HAS qualified or been approved for the loan.  Based on this preliminary information, a loan officer issues a "pre-qualification letter" to the consumer.  Loan approval is contingent upon a much more formal underwriting process that comes later.

Many real estate agents use the same basic process to pre-qualify a potential buyer before they show the buyer any properties.  Why do they do this? Looking for the right property is a time consuming venture.  Realtors make their money on sales that close, not on how many properties they show.  By making sure that a potential buyer has the resources and income to close on the property, the realtor can be reasonably sure they are not wasting valuable time.