You have a pre- approval letter but how do you know if it is worth anything? Below is a checklist of questions every borrower’s broker or listing broker should ask to see if the letter is valid or not. A “NO” to any of these questions means you do not have a valid pre approval.
Underneath the questions is an explanation to each of why the questions should be asked.
Please let me know if you have any questions regarding this or other lending needs.
HOW TO TELL IF A
PRE APPROVAL IS VALID OR NOT
1. Does the person who signed the pre approval letter
have an NMLS # after their name?
2. Was a credit report with 3 credit scores run?
Do the credit score exceed the minimums?
3. Were the “findings” run? If so were they accepted?
Which type of findings? (LP, DU, GUS)
4. If the borrower is self employed – were the Federal Taxes
5. Were the funds to close verified and pay statements
The lenders name does not have an NMLS number after their name. This means they are not licensed and do not even have the ability to run a credit report. They just fill in the blanks on the application.
There are some major lenders (and some small ones) who will not run a credit report until they have a contract as it costs them about $24 to pull a credit report. 60% of all credit reports have an issue on them, which should be discovered before going under contract.
Did the lender actually review the documentation especially the income taxes of a self employed borrower?
Without a credit report there is no credit score. 40% of the determination of doing a conventional loan is based on the credit score. Most investors and mortgage insurers have a minimum credit score that they will lend or guarantee a loan.
Did the lender run the borrowers data through an automated underwriting system such as DU (Desk Top Underwriter), LP (Loan Prospector) or GUS (government underwriting system? Was the loan accepted, because if not the chances of your borrower actually getting a loan is slim.
Last but not least, can the borrower lock in at time of the application or do they have to wait until the commitment letter? Do they run the risk of rates increasing and be out of contract?