Tampa Home Buyers: "PQ" vs. "PROOF OF FUNDS vs. "DU"

There are many Tampa home buyers looking to buy a home before they figure out how they are going to afford it financially.  I know, because many of them call our office and mistakenly think they need to find the house first and worry about financing later.  

Tampa Home Buyers: "PQ" vs. "Proof of Funds vs. "DU"

Not so…

The reality is that first you are going to need to jump through some hoops with a lender to prove that you are indeed qualified to buy.

This is the first step Tampa Home Buyers take before they shop for a home.

Your job is to convince the  Tampa home seller that your offer is something the seller needs to pick, because your financing qualifications are solid…and hopefully better than the others. 

Don’t spin your wheels by trying to wing it…by thinking that you really don’t need a PQ or a POF at this time, and will provide it later or when the seller's agent asks for it.  Oh, Please no! Doing that is destined for failure.

If a house looks good and is reasonably priced, chances are there will be more than one offer…if you love the house, other buyers probably will also.

If you are a serious Tampa Home Buyer, it is in your best interest to understand the difference between a PQ, POF and DU and when to use it.

  • PQ = Pre-Qualification (probably you qualify)
  • POF = Proof of Funds (you do have the cash)
  • DU = Desktop Underwriting Approval (a verified Computerized Approval)

A PQ is a PRE-QUALIFICATION of your ability to buy.

There are good PQ’s and there are lousy PQ’s that are not worth the paper they are written on.

A GOOD PQ:  is one where the lender has pulled your complete credit (not just a “soft'' pull) and carefully reviewed your income, assets plus your DTI (debt to income ratio).  That is just a start to determine what purchase price you can qualify for and what loan program will best suit your profile.

Don’t settle for shortcuts from online lenders that don’t ask questions and allow you to create your own Fake PQ letter on your private computer.

Tampa Home Buyers: "PQ" vs. "Proof of Funds vs. "DU"

Sounds crazy doesn't it?

Sometimes right there on the PQ you have the option to revise, or alter the prequalification.  Don’t do it.

The internet is full of scammers who will dash your dreams of home ownership if you exaggerate or rely on what does not exist.  

Some will claim that you only need to answer a few questions… and they will quote you a lower interest rate than is possible.

By the time you figure out the bait and switch, you are knee deep in the transaction so you just go along and over pay for the new charges.

True Story:  I had a Tampa Home Buyer client that was doing a loan with a “voice on a mobile phone” from California.  I suggested getting another opinion from a FLORIDA mortgage broker.  Buyer nixed that because he liked the story he was told about getting the lowest costs.

Three days before closing, the terms of the loan changed…sure, the buyer could still get the loan but he had to pay $10K more in costs.  

The Tampa home buyer was livid because he felt cheated and wanted to speak to the manager.  The voice on the cell phone (his prior trusted mortgage person) hung up and no longer answered the phone.

The Tampa home buyer was forced to take the new crappy deal because otherwise he would have lost his $8K escrow deposit plus the house and  all the other money he paid for inspections, appraisal, and survey.

Moral of the story:  There is no free lunch…

What you end up with depends on your credit, income, debt, cash available, secondary assets and the type of property you are buying.

I owned a large mortgage company many years ago and I know how the game is played. Find someone reputable and stick with them.

$$$  Getting the best mortgage deal…

All reputable lenders will be similar in their charges.  If something sounds too good to be true, don’t believe it. Your financial picture is your own personal fingerprint…no two borrowers are alike so don’t compare your loan details with your co-worker, relative, neighbor or anyone.

Mortgage companies are a business just like Real Estate.  You can’t believe everything you hear…

A good lender will ask for lots of documents upfront so that they have a comprehensive overview of the quality of your borrowing ability…

That eliminates any future surprise or denials when the underwriter starts digging for confirmation.  Sellers will look at your PQ letter and scrutinize your qualifications.

It does not take much for a smart seller and an educated seller's agent to spot a fake PQ letter.  Tampa Home Buyers: "PQ" vs. "Proof of Funds vs. "DU"

Recently, I saw a PQ letter for a Tampa home buyer where everything stated about the borrower was created from only what the buyer verbally told the mortgage broker…NOTHING was actually verified.  

There was no credibility to the pre-qualification and when the seller questioned the validity of the PQ, the offer disappeared. No surprise. 

Things to consider on a Buyer Pre-qualification letter.

  1. Look at the dates. The PQ letters typically are good for a few months, never is it good for 12 months.

  2. Does the interest rate make sense? When interest rates are hovering around 7%, it is unlikely that the rate quoted will be 5%.

  3. Does your PQ letter match the offer you made?  I have seen purchase offers stating 20% down on the contract LTV (Loan to value) but the PQ says the borrower only has 3.5% down.  That's a huge discrepancy!

  4. Don’t exaggerate…it will not work.  Tell it like it is so that a good lender has all the facts as he searches for your best loan product.

  5. Have your lender call the seller's agent to ask if they have any questions. Good lenders that hustle will do that.

  6. Get a FLORIDA lender.  Out of state lenders or banks are not the best options as they are not familiar with Florida’s nuances.

What is a POF: Proof of Funds?

Anytime a home buyer in Tampa wants to purchase a property with cash, they need proof that the cash is actually available. 

Another true story: Once on a cash purchase, we learned that the buyer who wrote up a cash offer planned on selling his boat and motorcycle to get the cash…and he did not have a buyer waiting to buy the items.  The offer was tabled and not submitted since he really did not have the funds.

Proof of funds does not mean you must have paper cash money under the mattress (although we have had that too, which made it sticky since the lender had to verify where the money came from).  Most lenders want “seasoned” funds so they can see where the money came from.

Why you must be Ready, Willing and Able to buy…

When your offer is submitted, it must be accompanied by either a PQ letter or POF Proof of Funds or a Desktop Approval so that the seller can properly evaluate your ability to buy the property.

When you go through the Pre-qualification process, it also shows where your strengths and weaknesses are regarding financing.  If you need a cosigner, now is the time to sort that out…before you make an offer.

Get an advantage with a Desktop Underwriting Pre-Approval

Tampa Home Buyers: "PQ" vs. "Proof of Funds vs. "DU"

In a real estate market  where almost everyone provides only a pre-qualification, a DU approval guarantees that your offer will at least get the seller's attention.

A “DU” is a computerized loan approval (Fannie-FHA-VA) which verifies that the home buyers have submitted a loan application, credit profile, finances, personal and employment information into a computer application to assess the data.

It provides a recommendation on whether or not the loan meets minimum loan guidelines or not.  If approved the borrower is assigned a “case number” by the lending institution.

This virtually guarantees that the buyer is approved and there will be no last-minute (buyer) surprises.

A “DU” is considered the GOLD STANDARD for a buyer's qualifications…and the closest you will get to actually being approved to close…take advantage of this opportunity when buying a home.

Contact Buyers Broker of Florida

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Post a Comment