I just got done reading a great post from Jesse Clifton titled:  I'm sorry, what did you just say? and it made me think about how many loan officers everyday write up pre-approval letters and really give no real thought on the outcome of what they just did. 

I have been around long enough and heard the horror stories from real agents about how the buyers loan fell apart and it created a series of unfortunate events that killed the sales transaction.  I firmly believe this happens because the mortgage pre-approval was weak to non-existence to start with.

So I would like to share some advice for Rookie Loan Officers and Real Estate Agents.

First and Foremost, the lending environment has completely changed.  Our industry for better or worse has done a complete turn in the last 12 months.

Two years ago a lender could have had a person with a pulse walk into their office by mistake and within 30 days they were in a house.  This type of hazardous lending practice today is NON-EXISTENT. 

Today, approving borrowers has gone back to common sense underwriting for most banks.  You need to have a job for 2 years in the same employment or have 2 years of solid tax returns if self employed.  You need a great credit score (notice I did not say good).  You need assets in the bank ( the more liquid, the better) and you better have a good reason to buy.  Last, a smart mortgage professional is not going to stretch a buyers payment to any uncomfortable loan limit.  

Before the mortgage pre-approval letter is ever written the following items must be done, otherwise the pre-approval is GARBAGE.

1.  Credit needs to be pulled on the borrower.  The Loan Officer needs to know how to analyze that report and make a determination if the borrower even meets the loan requirements.  If you cannot make a 100% determination, DO NOT WRITE THE PRE-APPROVAL LETTER.

2.  An Automated Underwriting Engine (DU,LP,) must make an initial determination if that loan can be approved in the first place.  If you cannot get the automated engine to approve the loan, DO NOT WRITE THE PRE-APPROVAL LETTER.

3.  Documentation must be gathered from the borrower to determine if it matches your automated approval with what was given on the loan application.  If the borrower told you upfront he makes $5000.00 a month and you can only verify $3000.00, DO NOT WRITE THE PRE-APPROVAL LETTER.

4.  Look out for things that are overlooked such as Foreclosures in the Past or Bankruptcy's.  The loan also needs to pass the smell test.  If it looks bad, smells bad and tastes bad, then it's probably bad.  DO NOT WRITE THE PRE-APPROVAL LETTER and send it up to your head underwriter for the challenging issues.  Some files have one issue or another. 

So if your client now makes it thru steps 1-4, you probably have a strong enough case to issue a mortgage pre-approval letter.

Furthermore, be nice to the agents that call you when they want questions answered on the mortgage pre-approval.  If you followed steps 1-4 properly then you will have plenty of great things to say to the agent about your client.  I have built some great relationships over the years just by being helpful to a listing agent I never knew.

Last, to the listing agents of the world out there call the lender on that mortgage pre-approval and make sure it's solid upfront.  Ask the questions I just highlighted.  Remember its your job to look out for your clients best interest.   

We are unique people out there.  We expect better then "would you like fries with that drink".  I just have learned to use my Midwest values and transfer them into my mortgage business.  If you are looking for something a little more unique in your next mortgage loan, please do not hesitate to get a hold of me. 

My name is Gary Miljour and this is what I do best.