Most people regard their financial circumstances as personal and confidential. Since buying a home is one of the largest purchases most people make in their lifetime, it’s reasonable to assume that some exchange of financial information will be necessary. But what specific information do you need to tell your real estate agent? As a buyer, when you meet with a real estate agent, there are only a couple of questions you should be asked about your finances, but they are critical ones.
1) Have you met with a lender who has pre-approved you for a specific amount?
2) For what amount are you pre-approved?
The agent will likely also ask you for a copy of that pre-approval letter as soon as you have it so that he or she has the documentation as proof when you make an offer on a home. Having the pre-approval letter is critical to a seller’s perception of your ability to make a bona fide offer. Without that proof, the seller may easily choose to turn to another offer from a buyer who does have it. That documentation also confirms for the real estate agent that you are qualified to buy a home in your desired price range. Since most agents work on commission, it is reasonable to be asked to provide documentation that you are a qualified buyer so that time isn’t wasted looking for homes that can’t be afforded. If you plan to pay cash for a home, you will need a written letter from your financial institution that confirms your ability to pay cash for a specific amount.
When it is time to fill out a purchase contract, your agent will also need to know the type of loan you’ve applied for (for example, conventional, FHA, ARM, etc.) and what percent down payment you will pay. These are standard parts of a purchase contract that a seller expects to see when deciding whether to accept your offer.
A real estate agent never needs to know your salary or your credit score and never needs to see your pay stubs, your tax returns, or your financial statements. Only your lender will ask you such questions and request financial documents. Your lender and real estate agent will need to be in contact with one another to ensure terms of the purchase contract are being met, but the lender should always keep the specifics of your finances (credit score, salary, net worth, etc.) confidential.
As a seller, you are not required to reveal personal financial information to your listing agent, assuming your mortgage is not in a state of financial distress. Your agent, however, can be of help to you in figuring out your net proceeds based on the sale amount of your home and miscellaneous expenses you will incur as part of the sales transaction. In this case, your agent would need to know the approximate balance left on your current mortgage.