What is typically a requirement for buyers to obtain financing?

A pre-approval letter is a crucial requirement for buyers seeking financing, as it demonstrates their creditworthiness and ability to repay a loan. This letter is issued by a lender after evaluating the buyer's financial situation, including income, credit score, and assets. It indicates to both the seller and the buyer that the financial institution is willing to lend a specific amount of money under certain conditions.

By having a pre-approval letter, buyers can show sellers that they are serious and financially capable, which can enhance their competitiveness in a real estate transaction. It helps streamline the process, as buyers who present this documentation are more likely to close the deal quickly with financing already effectively set up.

In contrast, other options such as signing a verbal agreement would not provide any formal assurance to lenders or sellers regarding financing. Paying the full price upfront eliminates the need for financing, and providing contractor estimates does not pertain to the buyer's eligibility for financing but rather to property improvements or cost assessments, which is unrelated to the financing process itself.