Ever Seen a Pre-Approval Letter That Reads Like a Sweepstakes Mailer?
In the Bristow, VA real estate market, properties are not staying on the market very long at all. In fact, I have had the pleasure of listing a handful of single family homes in Bristow that have resulted in multiple offer situations in less than two days. Not all buyers are putting their best foot forward and fail to realize it. Some have homes to sell that they haven't even gotten on the market yet. Why are they making offers? Bristow sellers are getting at least two non-home sale contingent offers in every multiple offer pile. A buyer that is ready, willing and ABLE to act is what every Bristow seller is seeking.
Then there are buyers that appear to be reading, willing and able to act on paper. Twenty percent down payments and a lender lettter that, at first glance, looks very good. A well known credit union tells you they are qualified. Then this Top Bristow Listing Agents takes a closer look and the words leap off the page like a flashing danger sign.
Based on the information you provided, you may be qualified for a mortgage of up to (insert amount here.)
They may be qualified for the mortgage? MAY? Top Bristow Listing Agents love certainty. The word "may" has no business in a lender pre-approval letter. That's the kind of thing you see in a Publisher's Clearing House Sweepstakes. "You may already be a winner." Not confidence inspiring at all.
Having represented a buyer that swore up and down that Navy Federal Credit Union had qualified her for a mortgage of waaay more than we were about to write an offer on, I asked to see the letter. There were the words. "You may be qualified for a mortgage up to.." Ugh. I asked how she got this letter. My first time buyer, having no clue how the process worked, answered, "I just filled in the answers to how much money I make and what my debts are and I got this letter emailed to me." In other words, no one had taken paystubs to verify her income or run credit to verify her debts.
Turns out, the answers she gave online were not even accurate, based on what underwriteres would be requiring. I called a trusted, local lender at 8pm that night and had him talk her through his online application. What popped out the other side was a pre-approval letter for a lot LESS than what Navy Federal had given her. Why? There was no lender to ask her questions and verify the answers. She had put in answers that were guesstimates and based on last year's salary. She didn't take into account her pay decrease that was only lasting six more months. She had put in a second income for a job that she had not worked the minimum two years that the underwriters required. Without the guidance of a lender, she was left to put in any answer that her untrained real estate mind thought was right. In her mind, it was logical that this decrease was only lasting one year, while she was a teacher's assistant and learned from one of the best. She would be back teaching at the helm of a classroom next year. That's not how lenders see it. What is happening NOW is what matters if you are an employee. What has happened in the last two years with regard to your adjustable gross incomes in your tax returns is what matters if you are self-employed. Real estate agents and lenders know this. The majority of buyers don't.
Credit unions like Navy Federal, USAA and others that do not put you with a lender, but keep with a call center until you are under contract, write those "may be qualified" letters because they really don't know your qualifications. Yet, many agents see the names, think of the big marketing campaigns instilling trust and loyalty and think those letter are golden. If there isn't a lender with a direct phone line on the bottom that a listing agent can call and verify the pre-approval, the letters are worthless.
Credit unions are great when it comes to car loans, credit cards and saving accounts. They are unreliable and terribly expensive when it comes to mortgages. How much a buyer wants to pay for a mortgage is their business, but if you are running around town with a sweepstakes lender letter from a credit union and wondering why your offers aren't getting accepted, try getting a legitimate pre-approval letter from a local lender that can attest that they have verified your income and assets. Your results are very likely to change.