Q: I have always found your articles very informative and one recently in particular that had the headline “Is a credit report really necessary with a home offer.”

Pulling a copy of the credit report is the function of the lender, not the real estate agent. This brings up the issue of pre-approval letters versus pre-qualification letters. Surprisingly, most people, including real estate agents, don’t know the difference.

A pre-qualification letter merely spells out what the buyer is qualified to spend. A pre-approval letter actually is a commitment from the lender in writing to a buyer for a set amount that the lender is willing to loan. A pre-approval letter typically is contingent on whether the property that is eventually chosen appraises out in value.

Confusing pre-qualification and pre-approval could lead to dire consequences for the buyer.

Thanks again for your very informative articles. I look forward to them. We all have a lot to learn in this ever-changing business.

A: Thanks for your letter. I agree that many people, both real estate agents and home buyers and sellers, don’t know the difference between a pre-qualification and pre-approval letter from a lender. Some lenders even call their pre-qualification letters “pre-approval” letters leading to more confusion.

However, it is the sellers (not the agents, as far as I know) in some areas of the country who have been requiring buyers to submit copies of their credit reports and credit scores along with their offer to purchase. They are doing this even if there is a written approval letter (not prequalification) from the lender stating that the loan will be funded if the house appraises out in value.

Apparently, this bit of insecurity hasn’t hit home sellers in your neighborhood. Let me know if you start hearing about it.

Published: Jan 14, 2005