When selling a home, a good real estate agent will pre-qualify buyers before showing them property. Since you are a "for sale by owner" seller, you will want to pre-qualify your buyers before you sign a sales contract. Do not sign a contract with an unqualified buyer. If the buyer is unable to obtain a mortgage large enough to purchase your home, your home will be tied up by the contract preventing you from seeking another buyer.
Just for your information a pre-approved buyer has been approved for a loan with a lending institution for a specified dollar amount. A pre-qualified buyer is a buyer with an unconfirmed estimate of the dollar amount he can borrow from a lending institution. You want the buyer who is able to secure a loan large enough to purchase your home.
When it comes to pre-qualifying a buyer, you will be required to perform this task on your own. This will require you to sit down with the potential buyer and ask simple but personal information. You will need to know the buyer’s income and the buyer’s long-standing debt. You might embarrassed about asking this kind of personal information of a complete stranger, in some cases, or a neighbor, but don’t be. Most of us are aware and are ready to answer questions of this nature when making a large purchase.
You will need a pre-qualifying worksheet in order to the calculations by hand. After getting all the buyer’s information on monthly long-standing payments and income, you can obtain an estimated maximum dollar amount the buyer is able to borrow.
If you prefer a simpler method, while you have the buyer in your home you can have the buyer pull up moneynest.com or Ditech.com. These web sites will calculate the estimated maximum dollar amount your potential buyer is able to borrow.
The estimate is based on the yearly income, the monthly long-term debt, and the national cost of living average. The buyer’s down payment is then added to the estimated mortgage loan to come up with the maximum dollar amount the buyer can pay for your home.
It is important to find the right buyer for your home. You could waste a lot of your time by giving all of your attention to a very interested buyer, but on who cannot acquire the loan needed to complete the transaction. Upon first meeting with a prospective buyer everyone is on even terms. When they express an interest in making a purchase is when you will want to pre-qualify them. Once you have the buyer qualified it will be a relief to you both and you can both get down to the more serious business of making the purchase of your home.
