Does Your ONLINE Pre-Approval Cost Money?
Well if it is wrong, it may do just that!
A new construction listing of mine is up and ready to go. Recently I get a call from a potential buyer wanting to see this home as soon as possible. He provides me with a Pre-Approval that is over the asking price. There are a ton of other questions that I asked him, like time frame, did he have anything to sell, credit scores and the likes. Since I had not previously met him before I wanted to see if he could buy this home before showing it to him. We decide to meet at the property. After showing him this home he wants to put in an offer. While filling out the paper work he then tells me that his down payment is coming from the last deal he had that didn't close? WHAT??
So now I have a million more questions about what happened and WHY the last deal fell apart. It was in a different county and for $50K more than the new prequal we had. My thoughts are with the new home at a lower price point it should be okay. How could he have gone so far in the last process and still not qualify? So I was being optimistic that we could move forward. We had a pre qual saying so, right? HAH! So I explained to him that we needed to get him to a local lender to actually qualify him. This needed to happen ASAP so that the builder would entertain his offer. Without it, we were not going to be able to get him this house.
Needless to say the deal never happened. The buyer has enough income and decent credit scores on paper, but the problem was the way he was getting paid. Parts of his income is paid in bonuses and overtime. This won't work for his loan. So we are dropping the price point we are shopping at now and we will find him a different home that will work. My local loan officer was able to guide him in the how, what and why of getting a mortgage and how all of this works. She tried a few different ways to make it work, but her underwriting said we would not get to the finish line.
The pre-approval he had first time got him from offer, to contracts, to mortgage application and a home inspection. While I don't know what bank that deal was, I know that it cost him money. Time and money to all parties. This was almost an instant replay except that the red flags of caution and concern unfurled when he told me that the last deal he had tanked. How it got that far is beyond me.
As a consumer make sure that your bank knows all the details of your income and how it is earned. Not all income is created equal when applying for a mortgage. Banks like consistent and documented numbers. Loan to debt ratios matter. How you get paid is part of the picture and sometimes seems unfair.
As a real estate agent when I see or hear a part of my clients ability to buy of concern, I jump on the opportunity to find out answers BEFORE we get too far along in the process. Having a lender that goes above and beyond in this deal was super. My clients are sad that the home they wanted is not going to work, but happy that we did not get the process going again like last time. They are baffled that it could have been an instant replay. They thought they were doing the right thing. Now they understand the limitations and we are looking at homes in the price range that they will be able to get a mortgage.
Another reason to work with a local, individual mortgage broker AND a local real estate agent.
Quicken LOANS.. you could have cost my client more money. That Pre-Approval letter was worthless. Absolutely worthless indeed!