Dian Hymer’s column isn’t exactly suited to Arizona.
The most common contract used in Arizona requires a “Lender Status Report” instead of a pre-approval letter. The Lender Status Report, or LSR, provides the seller with more information about how solid the lender’s approval of the buyer is.
Some lenders used to give out pre-approval letters like candy without doing much research on the buyer. Then too often it turned out the buyer could not really qualify for a loan. That really hurts a seller.
With the LSR, the lender has to state the information he used to approve the buyer.
– Lender talked to buyer and based on that information and the Trimerged Residential Credit Report (TMRCR) the buyer is pre-qualified
– Lender received signed application and based on that information and the TMRCR the buyer is pre-qualified.
– Lender received signed application and all requested supporting documentation and based on the information and the TMRCR the buyer is pre-qualified.
– Lender has provided buyer with a Good Faith Estimate.
Each one is a progressively stronger pre-qualification.
So with the LSR, the seller knows better how well the buyer has been pre-qualified by the lender so he can make a better informed decision when evaluating an offer.
If the lender has provided the buyer with a Good Faith Estimate, that buyer is a lot more qualified than if the lender only spoke with the buyer and checked his credit report.
The LSR is good for the seller, of course, but it’s also good for the well qualified buyer since it will show the seller how qualified the buyer is and how seriously to take the buyer’s offer.
That is, a seller may take a low offer from a well qualified buyer more seriously than an offer from a buyer that only had a phone call and a credit report with the lender.