How to Qualify a Buyer

How to Qualify a Buyer

Does your customer or client need to be pre-qualified? I am a licensed Real Estate broker and Loan officer and here is how I did it before becoming a loan officer. No matter the state; math is still math. However, an agent can only pre-qualify a person to an extent. That credit report is a BIG must. The best thing to do is refer the buyer to a lender. If you are lucky you have an in house lender. Bless your heart.
I have found that a typical person can qualify for a home that is approximately 2 1/2 times their yearly income before taxes (include spouses yearly gross income if any).
Depending on the debt to income Ratio's of 28% or 36% and some Refinances of 45 % along with the amount of the down payment and the amount of the property you are buying or refinancing, will be the determining factor in your ability to purchase. (not to mention credit reports) you should have a beacon score of at least 675 to even qualify for a sub prime loan. Obviously higher is better. unless were talking about a different kind of scoring system, (which is a whole other article).
Qualifying ratios are:
28%= total monthly debts
36%= living expenses + long term debts.
A prudent agent will Pre-qualify a prospective buyer as soon as possible and even before showing that possible buyer properties. Any agent that does not get a pre-qual may find out later that they have not acted in the best interest of the buyer or the seller.
Now past all that. The agent has two things that he may choose from.
1. Get the financial information from the buyer them selves to do the appropriate income/expense analysis. Minus the Credit Report. (which is never a good thing)
OR
2. Refer the buyer to a lender.
The last solution is always the best. It can help to speed up the loan process, also it can help you better decide on what contingencies to present an offer to the seller and what properties the buyer should be looking at.
Another benefit to Pre-Qualifying, is that you can weed out the serious buyers from the casual lookers. although you should be nice to the casual lookers and handle them with care, , they could come back later as pre-qualified buyers. but until then do not waste al lot of your time on them.
A good way to handle this is to talk to them about what they would like, ask how interested they are and tell them that your office likes to have pre-quals before you show properties. On the other hand, if they insist, try to schedule a time that you are the least busiest to show them a property.
You may say, "Yeah but they will go some where else, and someone else, will show it to them."
True. And if they still are not pre qualified then someone else can waste their time and you can concentrate on the real buyers.
I have had both instances happen to me. Not withstanding the fact that I have learned, quantity of time spent with a person does not reap as many benefits as the quality of time spent with the right people. And saving time by not wasting it allows for more time with real customers with real money.
You can still be nice polite and give courtesy to everyone, You just have to require the same policy for everyone.

Thanks for reading. I hope the articles I write help all who read them and make a decision as to whether they like them or not. Most of all I hope it helps you to make up your mind as to the direction you need to go.

Ten Ways Of Financing Real Estate

Do you remember when real estate financing meant you saved up enough to put 20% down on a house, and then you got a mortgage loan for the other 80%? Well, you can still do that, but there are many more options now. Here are ten of them.

1. Gifting programs. In some parts of the country, builders fund foundations that give you a portion of the downpayment, so you can get into a home with as little as 3% downpayment from your own pocket. FHA and other lenders have so far approved of or allowed this.

2. No-doc loans. These and "low-doc" loans, meaning no or low documentation requirements, are back, and you can find them through online banks. These are for those of you with bad credit but 20% to 30% to put down on a home. You don't even have to have a job.

3. FHA loans. The Farm Home Administration doesn't actually loan the money, but guarantees your loan for the bank, so they can loan up to 97% of the purchase price, depending on the particular FHA program.

4. VA loans. If you have been in the armed services, have a decent job, and can save two or three paychecks, you can probably get a home with a VA loan.

5. Land contract. Also called "contract for sale" and other names depending on the part of the country you are in, this just means that you make payments to the seller instead of a bank. It's up to you and them to negotiate downpayment amount, interest rate, and the term of the loan.

6. Seller-carried second mortgages. Some banks will allow you to have as little as 5% into a home purchase, but will then only loan you 80%. The seller can take payments on a second mortgage from you for the other 15%.

7. State housing programs. Almost all states have some sort of financing help in the form of a loan-guarantee program or outright loans for low-income buyers.

8. Family loans. It may not be out of charity that a brother or a friend lends you the money to buy a home. A 7% return might look awfully good if their money is sitting in the bank at 2%.

9. Manufacturer loans. Some manufactured-home companies are arranging financing with 5% or less down for their buyers. They must feel their money is secure, since a good modular on a piece of property is nothing like a mobile home on a rental lot.

10. Credit cards. This is a risky one, but if you have a low-interest credit card, you can use it to come up with the downpayment, especially if you can pay it off soon with a coming tax refund, for example. Banks generally won't allow this, but you can combine this with seller financing.

Are there more ways to approach real estate financing? You bet. This was just to get you thinking.



About the author:
Steve Gillman has invested in real estate for years. To learn more, and to see a photo of a beautiful house he and his wife bought for $17,500
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