Of course you want a potential buyer to be able to get a loan. If they want your house and can’t get one, they have just wasted a lot of your time and perhaps got you all pumped up for nothing. That’s no fun. You probably have heard the terms “preapproval” and “prequalification” but aren’t clear on what they means, the difference, and the significance of that is for you when selling for sale by owner.
Here are the basic definitions:
Prequalification – A condition where a lender has generally assessed a buyer as a good candidate for a loan, based on unverified information from the buyer. It is not a guarantee that the buyer will get a loan.
Preapproval – A condition where a lender has not only assessed the buyer’s loan application information via the prequalification process, but has also taken that loan through several other steps to insure a loan commitment to the buyer.
As you can see, prequalified means very little as it’s only based on what the buyer has told the lender about his finances without verification. Some buyers slant information to make themselves look good on purpose, and some are not aware of exactly what information will be taken into account by the lender.
I always tell my readers that if you are selling your own house, you don’t want to deal with prequalified buyers. If someone really loves your house, tell then to come back and make an offer after they’ve been preapproved.
Handy tip! If you have trouble remembering which is better, think of the phrase “Q&A” as in “questions and answers”. Q comes first and A follows. And that is just what happens with getting a loan. First you get preQualifed and then preApproved! Hey, it works for me!
