Just received a call from a first time home buyer (FTHB) that has just got a contract accepted to purchase a new home. He has been preapproved with two of the largest banks in the country. He called some friends because he was so excited to share the news. They asked him to give me a call. He called and wanted to know what my rates were.
The FTHB then forwarded me the Good Faith Estimate (GFE) from Big Bank A. So many things were missing from the GFE, making the bottom line artifically low. I completed my GFE which included among other things an estimate for Home Owner's Insurance and the proper number of months of tax impounds to be collected. I called to discuss my higher bottom line number with the buyer before emailing it over to him.
I explained to him that my bottom line was higher but I had added in items that would have to be paid. "No problem," he said, "You can just add those to my loan balance. That is what Bank A and Bank B told me they would do. I only need to come up with my down payment, right?"
I referred him back to the GFE he has just forwarded to me from Big Bank A showing the amount of cash due at closing (which of course included the closing costs).
Imagine, no one from Big Bank A or Big Bank B was truthful about closing costs. Do these Big Banks really allow their loan officers to get away with this? Why bother with a pre-approval if you're not going to make sure that the purchase transaction can close? And how ticked off is a buyer when they thought they had to come in with the down payment of $14,000 and the real cash needed to close is closer to $30,000?
No wonder so many purchase transactions fall out of escrow with "pre-approved" buyers. What exactly do some LO's think "pre-approved" means? That the buyer only needs the income and the credit score needed to get an automated approval? I thought a pre-approval would come with advice on how to write the contract to cover closing costs, if needed, or make sure the client had funds to cover all the closing costs? After all, an automated approval is only as good as the information put into the system.
How many hours of work are are being wasted, put into deals that won't close because loan officers are lazy or just plain don't get it? 50%? 75%? 80%?
Livermore Mortgage Broker
Comments(5)