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Mortgage Pre Approvals are a Joke

Real Estate Agent with Blanchard and Calhoun 250455

Mortgage Pre Approvals Are a Joke

Reviewing a GA real estate contract for some way to keep your seller clients from loosing a deal due to the buyer's loan falling through last minute is a joke! Realtors have always went through the motions of getting a buyer's pre-approval from the lender when the contract is written, but I'm finding more and more that a pre-approval is useless to me and my seller clients. Partner this with a ridiculously long financing contingency some buyer's agents are going after puts a seller at risk for a last minute problem.            Image courtesy of Stuart Miles/ FreeDigitalPhotos.net

Loan Approved


What is a mortgage pre-approval?

The buyer provides the lender with general information such as social security number, bank statements and tax returns. With a simple look and a debt to income formula a lender issues a pre-approval subject to satisfactory appraisal and lender under writing. 


Sounds good, right? As a seller and a serious buyer you have to know this is not enough! As a Realtor with many closings to my name, I now know better. I've begun holding buyer's and their agents to the terms of a reasonable financing contingency to include providing a full loan commitment from the lender several days even weeks prior to closing. I know there are not safe guards for all issues with a loan, but I'm starting to be a bit tighter on the pre-approval/loan commitment requirements.


So what is a full loan commitment?

Loan commitment is just that, a commitment from the lender after reviewing all items the underwriter deems fit. This is the complete approval from the lender that they will issue the buyer's loan. 


For everyone in the transaction the difference in a pre-approval and full loan commitment should be crystal clear. Buyers should work diligently to get the lender what they need to provide the loan commitment and lenders should notify the buyer and Realtors of any red flags that may come up. The day before or day of closing once seller have moved is not the time....grrrrrrr!


Can you tell I had a bad day at the closing table? I'm curious as to what safe guards you have found work in this situation.

Ron Beebe
PNC Mortgage, A Division of PNC Bank, NA - Downingtown, PA

Hello Caroline -

This subject is at the very front of our weekly meetings at my emoployer. We now strongly suggest (since we cannot require) that all applicants consider going through our pre-approval process (credit pulled, full review of income, assets and employment, and an actual human-being Underwriter reviews the information) versus a piece of paper that is a prequalification that is good for nothing more than a tail on a kite.

The biggest benefits that we are finding with this system are:

- Our pre-approval is a pre-underwritten pledge to lend.

- When the loan file flips to a "real-deal" we have so few conditions, and they are tied mainly to appraisal, title and the return of the disclosures with a true property address. Our conditions needed list is on most occassions less than FIVE items (woo-hoo!).

- The pre-approval is good for at least 90 days!

Hoping you start to see this kind of change, for the better, in the future.

Ron Beebe

PS How close is Augusta, GA to Jekyl Island? My family vacationed there earlier this year - I am still amazed that my wife found a place for us to vacation that included staying in JP Morgan's former condo!

Nov 05, 2013 11:35 PM
Caroline Ashe
Blanchard and Calhoun - Augusta, GA

Thanks Ron. I've heard that term pledge to lend recently and a strong pre approval is a must these days. There are so many underwriting factors, that anything could happen! 

Augusta would be about 5 or so hours from Jekyl I believe. :)

Thanks for your imput!


Nov 06, 2013 10:21 AM