Realtor Resources
A Realtor's Guide to Financing Red Flags
How to read a pre approval letter, which questions to ask the buyer's lender, and the warning signs that a deal is likely to fall apart.
Updated 2026-08-21| Applies to: Listing agents and buyer agents evaluating financing.
The short answer
A strong pre approval names the loan program, states that income, assets and credit were reviewed, and comes from a lender who will answer the phone. The most reliable red flags are a vague letter, a buyer who has not sent documents, a rate that has not been discussed, and a program that does not match the property.
Reading the letter
| Look for | Why |
|---|---|
| Named loan program | Program determines appraisal standards, seller credit limits and timelines |
| Statement that documents were reviewed | Separates a real pre approval from a soft pre qualification |
| Purchase price and down payment | Confirms the offer matches what was approved |
| Loan officer name, phone and NMLS ID | You should be able to reach a person |
| Expiration date | Credit and documents age out |
Questions worth asking the lender
- 1.Has the file been through underwriting, or is it credit and documents only
- 2.What is the income structure, and is any of it variable or new
- 3.Are the funds to close documented and in the buyer's account
- 4.Does the program have property condition requirements that could affect this listing
- 5.What is the realistic clear to close date, not the contract date
Property side red flags
- Condo project with litigation, high investor concentration or a large assessment
- Government backed financing on a property with peeling paint, missing handrails or a failing roof
- Two to four unit properties with thin comparable sales
- Seller credit requested above the program limit
- Well and septic properties without recent testing
General education for real estate professionals. Program requirements vary and change.
Frequently Asked Questions
People also ask
How long is a pre-approval letter valid?
Validity periods vary by lender, often somewhere in the range of 60 to 90 days, after which updated documentation is typically needed to reissue it.
Read: Understanding Your Pre-Approval LetterWho pays for the appraisal?
The buyer typically pays, often up front. The report is ordered by the lender through an independent process.
Read: What Happens if the Appraisal Comes in LowWhat is one point?
One discount point is one percent of the loan amount, paid at closing in exchange for a lower rate. The rate reduction per point varies daily.
Read: Should I Buy Down My Rate?What makes a condo non warrantable?
Common causes are high investor concentration, litigation, inadequate reserves, high dues delinquency or too much commercial space.
Read: Condo Warrantability and What Lenders Review in an HOATerms used in this guide
- Pre Approval
- A lender's written statement of how much you can likely borrow after reviewing your credit, income and assets. It is based on documentation, not just a conversation.
- Pre Qualification
- An early estimate of what you may be able to borrow, usually based on information you state rather than documents the lender has verified.
- Appraisal Contingency
- A contract provision allowing the buyer to renegotiate or cancel if the appraised value comes in below the purchase price.
- Seller Credit
- Money the seller agrees to contribute toward the buyer's closing costs or a rate buydown, limited by loan program rules.
Written by
Manny Oloyede, Mortgage Broker
NMLS #1824463 | Ultimate Mortgage Brokers LLC NMLS #2619461 | Licensed in OH | KY | NC | PA | SC | TN | TX
I have worked in mortgage lending since 2018 out of the Akron / Cuyahoga Falls Branch, helping buyers, homeowners and investors across Northeast Ohio and every state where I am licensed. These guides reflect the questions I answer most often, written the way I would explain them on a call.
Keep reading
Understanding Your Pre-Approval Letter
Learn what's in a mortgage pre-approval letter — purchase price, loan amount, down payment, property type, expiration, and conditions.
Problems & FixesWhat Happens if the Appraisal Comes in Low
Why appraisals come in below the contract price, the five options buyers and sellers have, and how a reconsideration of value works.
Mortgage ProgramsCondo Warrantability and What Lenders Review in an HOA
Why a condo can be denied financing even when the buyer is strong, what the condo questionnaire asks, and how special assessments affect approval.
Mortgage RatesShould I Buy Down My Rate?
How permanent points and temporary buydowns differ, how to run the break even math, and when paying for a lower rate is a poor trade.
Questions about your own numbers?
Send over your goal, income type and timeline and you'll get a straight answer on what is realistic.