Help Your Buyer Choose a Lender — Not Just a Preapproval Letter

One of the most important conversations you can have with a buyer happens before they ever start writing offers:

"Who are you using for your mortgage?"

Today, buyers have more choices than ever. They may have received a preapproval through an online lender, a bank, a credit union, a mortgage broker, or another lending company.

There's nothing inherently wrong with any of those choices.

But here's something every buyer — and every new agent — should understand:

A preapproval letter is only as useful as the process behind it.

Preapproval and Prequalification Are Not Always the Same Thing

This is an area where terminology can get confusing.

Some lenders use the word prequalification for an initial review based primarily on information provided by the borrower. Other lenders may use preapproval for a process that includes reviewing credit, income, assets and supporting documentation.

And some lenders use the terms differently.

The Consumer Financial Protection Bureau (CFPB) specifically notes that lenders' processes and terminology vary, so the words "prequalification" and "preapproval" alone don't tell you how thoroughly a buyer has actually been reviewed.

That's why I encourage agents to look beyond the title at the top of the letter.

Instead, ask:

• What information did the lender review?

• Was the borrower's credit reviewed?

• Were income and assets documented?

• Has the lender identified any potential issues?

• Is the lender available to answer questions?

• Does the lender communicate with the buyer and the agent?

• Will the lender be responsive when an offer needs to be written?

A strong preapproval should give everyone involved more confidence in the buyer's ability to obtain financing. It is not a guarantee that the loan will close, but it should be based on enough information to make the offer meaningful.

Your Buyer May Be Choosing a Lender Based on Convenience

Online lenders can make getting started incredibly easy.

A buyer may be able to complete an application from their phone, receive a letter quickly and begin shopping for homes.

But convenience at the beginning of the process doesn't necessarily tell you what the experience will be like once the buyer has a contract.

Once your buyer is under contract, communication becomes extremely important.

You may have questions.

The buyer may have questions.

The seller's agent may have questions.

Something may change with the transaction.

An appraisal may come in differently than expected.

The contract may require a financing change.

The buyer may need to provide additional documentation.

Who are you going to call?

That is a question worth asking before your buyer chooses a lender.

The Lender Is Part of Your Transaction Team

As a real estate agent, you're going to spend a lot of time communicating with your buyer.

You also need to know that the lender is going to communicate when it matters.

A lender who is difficult to reach can create frustration for everyone involved — particularly when you're trying to write an offer, answer a seller's question or keep a transaction moving.

That doesn't mean your buyer needs to choose a local lender.

It means your buyer should choose a lender who will:

Communicate.

Answer questions.

Explain the process.

Set realistic expectations.

And be there when the transaction gets complicated.

The CFPB recommends that buyers ask lenders about their preapproval process and what information and documentation is required. It also notes that some lenders conduct a more detailed review early in the process specifically to identify potential documentation issues and prevent delays later.

Before Your Buyer Starts Shopping, Ask One More Question

Instead of simply asking:

"Do you have a preapproval?"

Try asking:

"Tell me about your lender. Have you actually talked with them? Do you know who your loan officer is? And will they be available when we need them?"

That conversation can tell you a lot.

A buyer doesn't just need a number that says they can spend $300,000.

They need a lender who can help them understand what that $300,000 actually means — and who will communicate with everyone involved when the time comes to turn that preapproval into a real transaction.

The goal isn't simply to get a preapproval letter.

The goal is to build a team that can get your buyer from preapproval to closing.