Buyer Pre-Approval
Definition
A lender's conditional commitment to provide a mortgage loan up to a specified amount, based on verification of the buyer's income, assets, credit, and employment.
Example
A buyer provides tax returns, bank statements, and pay stubs to a lender who issues a pre-approval letter for up to $350,000. This letter accompanies the buyer's offer, giving the seller confidence the buyer can close.
Exam Tip
Distinguish pre-approval from pre-qualification. Pre-QUALIFICATION is an estimate based on self-reported info. Pre-APPROVAL involves verified documentation and is much stronger. Agents should recommend pre-APPROVAL.
Related Buyer Rep Terms
Buyer Broker Duties
The fiduciary obligations a buyer's agent owes to their client, including loyalty, obedience, disclosure, confidentiality, accounting, and reasonable care.
Buyer Representation Disclosure
A form that explains to the buyer the types of agency relationships available and the duties associated with each, required to be provided before substantive discussions begin.
Cooperative Compensation
The practice of a listing broker sharing commission with a buyer's broker, historically offered through the MLS but now prohibited from MLS display under the 2024 NAR settlement.
Buyer Consultation
An initial meeting between a buyer and agent to discuss the buyer's needs, explain agency relationships, review representation agreements, and establish expectations for the home-buying process.
Buyer Loyalty Obligation
The duty of a buyer's agent to act solely in the buyer's best interest, avoiding any conflicts of interest and putting the buyer's needs above the agent's own financial interests.
Termination of Buyer Agency Agreement
The legal ending of a buyer representation agreement, which can occur through expiration, mutual consent, breach, or specific termination provisions outlined in the contract.
Frequently Asked Questions
Test Your Buyer Rep Knowledge
Practice with exam-style questions to make sure you can apply Buyer Pre-Approval and other buyer rep concepts.