Don’t Be Fooled by Pre-Approval Hyperbole

Yes, it’s still happening! Pre-approved buyers are winning bids on their future homes only to find out that their mortgage lender didn’t really pre-approve them as they thought.

Just last week a borrower was referred by an irate real estate agent. The buyer had a pre-approval from a company whose marketing touted that they deliver a fully underwritten commitment letter in just 7 days! And they did just that however, no one pointed out to the buyer or their agents that the letter was subject to verification of income and employment.

This lender did not review recent and past income documentation for this pre-approval. The borrower had recently changed from a full salary role to a full commission role and didn’t have enough history of receiving only commission income required to qualify for their mortgage.

Make sure that you do not go through the laborious process of bringing a new listing to market, fielding perhaps multiple offers, selecting one offer to accept only to find out days later that the buyer cannot complete their transaction. Otherwise, you will be starting the process all over again.

One of the best ways to ensure that the qualifying letter is correct is to call the lender directly and ask these questions:

  • Did you review income and employment documentation for this borrower?
  • Have you confirmed that the buyer has enough assets today to complete this transaction?
  • On a scale of 1- 10, how confident are you that this loan will close, excluding anything to do with the property (appraisal, inspection, title, condo details, etc.)?
  • If the answer is under 10, determine how long it will take the lender to address any areas of concern.

Protect your reputation. Protect your relationships with sellers, buyers and cooperating agents. Spare the heartache. Make sure that your borrower is working with a lender who cares to get it right from the start every time!

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