A proof-of-financing letter with teeth might give home bidders an advantage

Last update: October 21, 2005 - 11:00 PM

A revamped Minnesota Association of Realtors form might provide more clarity to one of the fuzzy areas in making an offer for a house: the assurance buyers can provide that they have the means to make the purchase.

Customarily, the buyer's offer includes a letter from a mortgage originator stating that the buyer is qualified for a mortgage of up to a certain amount. But the credibility of a "prequalification letter" might depend on whether the seller and seller's agent have heard of the mortgage company, and whether the company is known to make an effort to confirm information that the potential borrower supplies.

The association says its recently revised, optional "Buyer's Financial Disclosure Statement" requires the mortgage originator using it to do a credit check and verify the borrower's identity, income, financial history and existing obligations. Real estate attorney Brad Boyd, chairman of the association's Forms Committee, called it a "due diligence checklist."

It's not a guarantee, and use of the form may vary among mortgage originators, some of whom have privacy and liability concerns. But the buyer whose financing letter has teeth could be in front of the pack when a seller is evaluating multiple offers.

NEAL GENDLER