#2 In a Series – Observations from a LO: Pre-Approval & Pre-Qualification

Source: Mortgage Pre-Qualifications Are Good (But Pre-Approvals Are Better)

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mortgage products michael nelson equity primeToday, I am going to post some thoughts on Pre-Approvals and Pre-Qualifications.  The article linked above does a great job explaining what these two items are – give it a read. Rather than re-hash what this article does so well – define these terms,  I am going to provide my observations on experiences I have had with borrowers, agents, and lenders on this important topic

Observation #1:  If you are not Pre-Approved, you are not a serious buyer.

Michael Nelson - Equity Prime, LLC The reality is this – if you are making an offer on a home – a pre-qualification letter is not worth the paper it is written on.  A pre-qualification letter by definition does not require  verified income, assets, and liabilities by the loan originator.  It may have a reliable FICO score – it might not.  The lender will pre-qualify your ability to borrower based upon the data you provide over the phone, e-mail, or text.  If the information is 100% correct you might be in luck and get approved.  If the information is wrong…….  let’s just say the experience is not pleasant and a lot of money is at risk.  Originating loans properly requires skill, experience, and certain financial analysis.  Don’t shorten this important process with the false hope that pre-qualification is as thorough as pre-approval.

What are verified income, assets, and liabilities?  To verify the aforementioned, the loan officer will do a deep dive into the financial condition of the borrower, run software that assists in the credit analysis, and conduct a thorough review of a credit report.  This analysis will require, in most cases, a review of all necessary documents.  Once this review is complete, the lender may provide a pre-approval letter.  This letter is a far more accurate assessment of the borrower’s ability to gain mortgage approval.

The point is this, pre-approved buyers give their real estate agent leverage to negotiate the most favorable deal possible.  (Yes, use a real estate agent – you need the expertise for this complicated financial transaction).  A pre-qualified buyer is always a higher risk for the seller than a pre-approved buyer.

Michael Nelson - Equity Prime, LLCObservation #2:  Do the work necessary in advance to gather all documents required by the lender.

I can’t tell you how many times I have received the frantic call from an agent or potential borrower at 10:00 AM pleading for a pre-approval letter by noon.  Don’t get me wrong, I want the call and I want to earn their business and trust.  Nonetheless, I always wonder if the borrower woke up that morning and for the first time decided they are going to buy a house today.

Establish a relationship with a lender early in the process.  Work with the loan officer and go through the documents, the credit report, and your financial situation.  Arm the loan officer with the information they need to gain pre-approval for the best product available for your situation.

A good loan officer will relish the opportunity to work with a borrower before the pressure of an offer enters the equation.  There are a myriad of products in the market that can change the purchasing strength of a borrower.  Make sure the loan officer has the documents and the time to work through your situation.  It can make a big difference on the overall cost of the loan and improve the negotiating position for the real estate agent.

Observation #3:  Be wary of the 15 minute pre-approval letter

Michael Nelson - Equity Prime, LLCThe 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, do the analysis, load the data into systems, and run the analytics….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 borrower need to question your choice of loan officer.  Obvious mortgage killers, un-seasoned BK, late payments, etc, are the exception. Mortgage killers take only a minute or two to disqualify the credit approval.

You need to have a rock solid pre-approval letter to present the best offer you can to a potential seller.  A home is an important decision that warrants the time necessary to do all the homework.  As best you can, establish your relationship with an agent and a lender early in the process.  When you engage your agent and lender early, they can do the work necessary to present you as the powerful buyer that you are.

Please feel free to send me a note, a text, Skype, or an e-mail.  I am happy to answer any questions that I can.  As always Happy House Hunting!

Mike

Michael F Nelson
720.213.6260 (voice & text )
mnelson@equityprime.com
@michaelfnelson2
Skype: michael.nelson2014
NMLS: 1314188
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Michael Nelson - Equity PrimeMichael Nelson - Equity Prime, LLCMichael Nelson - Equity Prime, LLC

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Michael Nelson - Equity Prime
Mike Nelson – NMLS: 1314188

 

 

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