Why Should I Get A Pre-Approval? I Have Excellent Credit And I Know I Will Qualify!

Real Estate Broker/Owner with Young & Young Properties BK3104907

In the last couple of weeks I have heard this question so much! I cannot stress to a homebuyer enough that there is even more of a reason now to get a pre-approval than ever.
A gentleman telephoned this week in need of a mortgage for a second home in Florida. He is currently working with a Realtor and he has already obtained a home inspection - meaning he has already spent money out of his own pocket. He stated that he has excellent credit scores (over 800 and that is excellent) and that he won't have a problem getting a mortgage. That may be true - 1- 2 years ago! What once was, is not true for today. He only has 10% to put down on his Second Home that he is under contract to buy. He needs 20% down. He has called all over the state of Florida trying to find a lender who will lend him 90%. Unfortunately, he most likely will not find one unless it is a small local bank.  Lending guidelines change so rapidly in our state as we are one of the states in the top 3 for foreclosures right now. RISK! The gentleman could have avoided spending money needlessly and wasting his time and the Realtor's time if he would have secured his financing first. Why shop for the largest ticket item you might ever purchase without knowing how you will pay for it and how much you can spend?

NOW...What is the difference between a Pre-Qualification and a Pre-Approval?
You may not know that there is a difference. There are some real estate and mortgage professionals do not know that there is a difference!

A Pre-Qualification is based on simplified information that you tell a mortgage professional. Sometimes your credit report is obtained and other times it is not. The loan officer is going strictly off of what you have told them.
A Pre-Approval means that you have made application, you have given the loan officer your paystubs, bank statements and tax returns and your credit has been obtained by the lender. Your information has now been "verified".

Steve & I take it a step further and run the loan scenario through the FannieMae Desktop underwriting system since FannieMae is the actual investor supplying the funds for the purchase. FannieMae also provides the guidelines for which to obtain financing to the particular borrower. We supply the Realtor with the FannieMae Pre-Approval along with the pre-approval certificate. The loan is then subject to Appraisal and Title report on the property only. The buyer and his credentials are "good to go". That is what every Realtor and Home Seller wants to hear. It may be a more conservative approach for the buyer, but you can bet he will not be embarrassed if he contracts on a house and cannot obtain financing afterwards.

It's a great time to buy! Get a pre-approval before you start to look and call Steve & JoAnn Srein to make it happen! (321-242-8240)

Posted by

JoAnn Young


Comments (2)

Omega Omega
Omega - Glendale, CA

Morning Steve & JoAnn - good for you!!! Stick to your principals and make sure anyone wanting to purchase goes through the channels you perscribed in your blog.


Mar 30, 2009 01:49 AM
Joe Harris
Morgan Financial - Melbourne, FL

With the current underwriting standards, it would be rather reckless to only pre-qualify a potencial buyer these days. 

Great artcle - I could not agree with you more.  As a side note, I had a borrower from a different state who I could not pre-approve for a second home because of the same situation (only had 10% down), and I told my realtor partner that he could not make this happen in Florida right now because there is no MI.  The borrower assured the Realtor that his lender (where the lived) could get it done.  Guess what - NO LOAN - NO CLOSE - NO PAYCHECK - BIG WASTE OF TIME!!!

So to take what you are saying one step further - one should get a local pre-approval!

May 29, 2009 08:52 AM