I heard you can't get pre-approved any more. Is that true? A recent CE class for RE had a mortgage broker in the class and she said pre-quals is all they can do now.
I'm in a finance class now and it's a "fine line" between pre-approved and having cash in hand. Mostly semantics. The big difference between the two is running the credit report, seeing the score and saying, "You're qualified for about $300,000" in 1 minute, which many bankers do. So technically, you can't be "pre-approved" as close to iron-clad locked in as the olden days. And, now if your buyer is under 640, run don't walk away. They will not get a loan. (So I'm told)
A Pre-Qualification is pretty much it these days, especially since the RESPA guidelines changes last January 1st. The FDIC website has a very specific definition of Pre-Approval. The FDIC states that the Pre-Approval cannot be subject to certain other additional conditions. Basically, nothing other than sales contract, property address, appraisal, insurance, title, and no material change in borrowers qualifications can apply.
Essentially, this means that the file be be fully reviewed and approved by an Underwriter, not a Loan Officer, prior to a Pre-Approval being issued. If you have a Loan Officer issuing the Pre-Approval simply based off of an automated underwriting approval, then they are not following the FDIC definition of what constitutes a valid Pre-Approval. Since the FDIC regulates all banks, everyone should be following this definition for them to remain in compliance.
You are correct in your reply post. The Pre-Approvals of the old days are gone now. Since last month, the new industry minimum credit score for FHA is now 640. VA is typically 640+ as well. While there are a few remaining lender still doing under 640, you will be a taking a big risk on the file actually closing.
Wow, great information Rodney. So, if mortgages are lower but fewer people get that lower rate because they raised the standards to get the lowest rates, isn't that in essence meaning higher mortgage rates? My son-in-law has a 710 so he's not getting the lowest rate. What are MOST people getting in mortgage rates vs. the lowest rates available nowadays?
Most all mortgage programs are now credit score driven when it comes to determining interest rates. For FHA/VA loans, the common pricing tiers are 640-659, 660-719, and 720+. Conventional loans pricing tiers at every 20 points from 620 up to 740.
Thanks Rodney. What % or those getting mortgages are actually getting the lowest rates possible? In other words, lowering the mortgage rates but raising the standards isn't really lowering them that much, is it? My daughter has a 730, but her husband has a 710. Her income is 1/3 of his. I don't think they'll get the lowest rate WITH A 710!!! Right?
As for someone refinancing, most of them are coming from much higher interest rates anyway. While they may not get the "lowest" available to the market, they are still bettering themselves. That of course assumes the refinance does in fact benefit them. At a 710, their rate should not be more than .125% higher than the best. Its when you drop below 680 that you see the biggest impact to the interest rate.
Rodney, that SMALL discount per month worked out to $26/month on a $400,000 home. Doesn't seem like a lot when you consider it's $2,600/month. But that's $312/year and if they stay for the average 5 year time, that's $1,500. So, "not more than .125% is a drop, a savings, and worth a bit of exploring to see if their credit report is like 80% of them out there, i.e. with mistakes.
Thanks for the insight.
Stephen
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