Preapproval First; Home Search Second
I receive a lead call.
The couple wants to see a home that is in their neighborhood, the neighborhood where they grew up and have lived their entire lives.
I meet them and we go to take a look at the house of interest.
The house is beautiful, it will meet their needs, and it is even at a good price.
They want to buy it.
I talk to them a little bit about their financial situation. They seem to have plenty sufficient income and strong long term employment. Their debt does not seem to be too high. They do not have much money saved and would rather not use it. They could possibly get gift money. They are not sure where their credit score stands, although they have spoken to an online lender who told them that they would need to increase their score.
I tell them that they will need to get preapproved, if they want their offer to be seriously considered. I put them in touch with a lender who is very familiar with closing cost and down payment assistance programs.
They start to get anxious and even a little perturbed when the lender does not give them an answer let alone a preapproval after a 5 minute conversation on the phone. The lender says that the wife's score is too low, but she does give suggestions for how to raise it, however this has an uncertain time frame. The lender, realizing that they are anxious to put an offer on this particular house, suggests that she may be able to give a loan in just the husbands name. Also, the lender would like to see more supporting documentation.
Eventually, within 2 days, the lender does give a preapproval letter for the husband that is sufficient to purchase this partricular home.
Oh no, another offer was accepted on this HUD owned home. We are too late.
How disappointing that they will not be able to purchase their dream home.
Should I have put the offer in and worried about financing later or should the lender have worked faster? NO!
It would be absurd for a lender to give a preapproval for a loan, which in this case was for over $250,000, after just a 5 minute conversation and with no documentation to back up the conversation. It would be irresponsible for an agent to put in an offer, not knowing if the buyer could afford the property.
The appropriate course of action would have been to have gotten preapproved, or even better, underwritten approved, prior to looking for a home.