Here are a few great quotes from agents regarding the importance of the mortgage pre-qualification process:
“If the buyer I sent in your direction receives a pre-qual, and then three weeks later does not pass underwriting, whose fault is that?”
“To be honest, if the mortgage broker or lender will not invest in the front end, collect and verify the critical information, I truly don’t have much use for them.”
“I need to KNOW that the buyer, who has invested their trust in me, will not be compelled to find someone else at the last minute in order to salvage the transaction.”
With that said, you can actually evaluate the quality of the pre-approval you received from your lender with one question:
“What are your findings?”
This simple question will go a long way in determining the validity of your pre-approval letter. The answer is either Approve/Eligible (Fannie Mae) or Accept (Freddie Mac).
What Are Mortgage Pre-Approval ‘Findings’?
These “findings” are in the report that outlines the factors that were used to either approve or disapprove that loan application.
The Fannie Mae (Desktop Underwriter) or Freddie Mac (Loan Processor) programs are the specific automated underwriting systems. These should absolutely be completed prior to the issuance of that pre-approval letter.
The underwriting report summarizes the overall underwriting recommendation. It lists the steps necessary for the lender to complete the processing of the loan file.
If a lender receives the go-ahead from Fannie or Freddie through these automated systems, underwriting should be relatively easy. If not, the transaction is most likely heading for trouble.
Timeframes
The pre-approval process is not a 15-minute conversation. If you supply me with all the documents necessary for a full document (full doc in industry jargon) review, I need time to read them. I’ll do the analysis, load the data into systems, and run the analytics….which takes a bit more than 15 minutes. Giving your lender time to process the information helps to secure a reliable pre-approval.
If your lender is offering you a super speedy pre-approval, you as the agent need to question your choice of loan officer.
Obvious mortgage killers, un-seasoned BK, late payments, etc, are the exception. These issues take only a minute or two to disqualify the credit approval.
Negotiation Importance
Home sellers and their Realtors insist that home buyers submit a valid pre-approval letter along with their initial offer for the home. Sellers don’t consider offers from people who haven’t taken the time to determine if they can even get approved for a loan in the first place.
Again, make sure to have your client reach out to me prior to going house hunting to get a true pre-approval letter!
