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Unless the buyer who makes an offer on your home has the resources to qualify for a mortgage, you really do not have a sale. You should determine a buyer’s financial status before signing the contract. Consider these five questions:
- Has the buyer been prequalified or preapproved (better) for a mortgage? Such buyers will be in a much better position to obtain a mortgage promptly.
- Does the buyer have enough money to make a down-payment and cover closing costs? Ideally, a buyer should have 20 percent of the home’s price as a downpayment and between 2 percent and 7 percent of the price to cover closing costs.
- Is the buyer’s income sufficient to afford your home? Ideally, buyers should spend no more than 28 percent of total income to cover PITI (principal, interest, taxes, and insurance).
- Does your buyer have good credit? Ask if he or she has reviewed and corrected a credit report.
- Does the buyer have too much debt? If a buyer owes a great deal on car payments, credit cards, etc., he or she may not qualify for a mortgage.
Do not be afraid to ask these questions. It is a waste of your time to show your property to people who cannot buy it. If they can’t buy the property, you can’t sell it. Asking these questions will save you time, safeguard you from unneeded frustrations, and provide you with assurance that your property is under contract with qualified, able, and ready buyers.
