Desktop Loan Approvals: A Flaw In the Home Buying Process

Desktop Loan Approvals:  A Flaw In the Home Buying Process

Several weeks ago, I met with a loan officer to discuss the possibility of doing some business together.  Among other things, I asked about the turnaround time for a pre-approval letter.  His response was that once they pulled credit, more often than not, they would go ahead and generate the pre-qual letter without having to send it to underwriting first.  I understand that it saves the loan officers and the lenders time and they want to postpone "working" on the loan until the buyer finds a house.  I get that.  I also get that the pre-approval process hinges upon the verification of income, employment, etc.  But here is the deal and this is what I told the loan officer:

The overarching perception of the desktop loan approval among real estate agents is that it really isn't worth the paper that it is written on.  He seemed surprised that I said it, but admitted that others agents may have (in the past) only hinted that they felt the same way.

I told him about an incident a few months ago whereby a loan officer issued a desktop approval and 6 weeks later, the buyer was denied credit because of something that was already on the credit report (which apparently the loan officer had not bothered to review until I submitted a contract).

From a real estate agent's standpoint, it just makes sense that we postpone doing our job (touring homes), until the lender does their job.  By the end our meeting, we had agreed that if we were going to work together, the loan application would have to run by underwriting first and the buyer would have to provide necessary documents upfront before the pre-qual or pre-approval letter would ever be issued.

Oh and the buyer who was lied to about being able to buy a home, well he caused the lender quite a stir to the point of seriously considering legal action.  From that point on, they played by the book and made sure that their responses were well crafted from that point on.

Here's the point:  all of our time is valuable and we usually don't have any of it to waste.  There is no point in us doing our jobs as real estate agents, when others in the process have work to do first. Remember that if we don't really know if a buyer is qualified, then we have no job to do.  Not only do the buyers have to have their ducks in a row, so do we.

There, I've said it.  Right or wrong, I've said it.