I recently came across What do you mean, you need a letter from my Lender? by Tish Lloyd and it reminded me of some of the referrals I'm getting lately as well as some of the prospects that are contacting me. Tish blogs about the "old days" and what Realtors used to do back then. It reminded me of my own "old days" (circa 2002) where prospective buyers could "lock & shop". Buyers would get pre-approved, lock in their rate and then go shop for a home.
Needless to say, those days are over and for a lot of Realtors (like Tish) so are the "old days" of taking out buyers who haven't been approved for a loan yet. So many of the referrals and prospects that contact me start out the same,
"I make XXX,XXX a year, I have a phenomenal fico score, I've got XXX,XXX to put down. I want to buy 123 Whatever St. in Anytown but my Realtor told me I need to get a pre-approval before I can make an offer".
Like so many prospective buyers (as well as so many of their Realtors/agents), they think all they need is a good income, money in the bank and a great fico. I assure you, I wish it were that simple but unfortunately, it is not.
There is no such thing as a "golden buyer" these days unless, of course, they have a ton of money that can be verified and documented.
First and foremost, I want to strangle the BA's (until they're blue in the face) showing these referrals and prospects properties without a pre-approval but if those BA's want to waste their time, energy and resources showing unqualified buyers properties they can't buy, I guess that's their prerogative.
I say it all the time and I'll say it again, "the loan process is so complicated and convoluted these days that prospective buyers really need to talk to a lender as soon as they start thinking about buying a house, not after they spent weeks looking at properties and finally found one they want to make an offer on".
The biggest issue I see with many of my referrals and prospects these days are they're self-employed people and while it is true that they make a lot of money, the fact that they write off a ton of it generally makes them unable to qualify for a loan.
It's kind of astonishing that I have to explain to these really intelligent and successful people that when they write that income off, it is no longer available to be used as qualifying income. It's just amazing how shocked they become that they can't write off most of their income and then turn around and use that same income to qualify for a loan.
Secondly, while it's nice that so many of these folks have managed to save up huge amounts of cash reserves, however, in order to be able to use these cash reserves as their down payment, the funds have to be in their own account and preferably seasoned for at least 90 days. Furthermore, depending on the loan program, depleting business accts (even if you are the sole owner or primary shareholder) can be a deal breaker in most cases unless, of course, the business is buying it as an investment and that is a whole other scenario.
Lastly, while it's great that not only have these folks been able to establish and manage a successful business but they've also been able to maintain phenomenal fico scores in process. BRAVO!!! WHO HOO!!! HALLELUJAH!!!
This is wonderful however, it doesn't matter if you have an incredible fico score because if your debt-to-income (dti) ratios are too high, the highest fico in the world isn't going to allow you to qualify for a loan.
Lenders and investors are much more stringent these days on dti ratios than they ever have been. While your great score can be a really strong and compelling compensating factor, you're going to need a lot more than a great score to compensate for those horrible dti ratios.
Anyway, the point is (I really do have one) that regardless of what you or your Realtor thinks you may qualify for, until you speak to a lender, all the money you make, how much you have to put down and those fantastic ficos don't mean squat - SERIOUSLY!!! It takes more than that to get a loan these days. Lastly, and I can't emphasize this enough, Realtors: stop wasting your time, energy and resources showing properties to people who aren't qualified to buy. SERIOUSLY!!!
Save your time, energy and resources for those that are serious buyers and by that, I mean those who have done what's necessary to qualify for a loan and have been pre-approved. I don't care what their grandiose excuses are or how confident they are, if getting a loan won't be a problem for them then talking to a lender and getting pre-approved will be a piece of cake - RIGHT???
Buying a home is one of the most important decisions someone can make. Today's real estate market can be really scary, which is why it's important to get as much info as possible before starting your search. The home buying process is not a simple process and it's because it can get really complicated and convoluted, that borrowers today need affordable loan options that are best suited for their own needs.
For more info on how you can get pre-approved for a mortgage loan, please contact me, Donne Knudsen, at 805.2069123 or donne4loans@earthlink.net. That's what I'm here for and I would love to be able to assist you in your search for an affordable home loan.
Pictures courtesy of flickr: leomitch lochman67 bwehr6 giacomomacis
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