A qualified buyer in real estate means the bank has deemed the buyer financially capable of purchasing a property. Prequalification is a simple process, while pre-approval requires more in-depth verification. Sellers prefer working with pre-approved buyers.
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 usually means that the bank has already deemed that the buyer has the financial means to purchase the property in question. However, this can mean that the buyer has been pre-qualified or pre-approved, which are actually two very different things.
Often, before a buyer begins to actively look for a property to buy, they may want to have a general idea of how much a bank would lend them 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, since he knows what price range to be in when showing the buyer’s properties. It also makes a more attractive purchase offer to a seller when the agent can add that the prospective buyer is a qualified buyer.
A buyer can ask the bank for a prequalification. Prequalification is relatively simple, fast, and free, in most cases. A buyer can usually pre-qualify over the phone or online simply by providing the lender with a general picture of her financial status, such as income, debt, and what he or she believes her credit score to be. In most cases, the lender uses only the information provided by the prospective borrower to make a prequalified decision; however, based on this alone, a buyer may be considered a qualified buyer when in fact they do not have the means.
A pre-approval, on the other hand, is 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 perform an official credit check when making a pre-approval determination. A Qualified Buyer who has actually been pre-approved is really what the term Qualified Buyer is meant to describe.
While a buyer who has been prequalified may give you some idea of the loan limit they will qualify for, there is no guarantee that the lender will approve a loan since prequalification was based entirely on information provided by the buyer. If any of the information is inaccurate, intentionally or wrongly, the lender may refuse to lend money. For this reason, most sellers prefer to work with qualified, pre-approved buyers whenever possible.
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