Why your pre-approval is no longer as good as you think it is!

By
Real Estate Agent with Long & Foster Real Estate Inc 610-225-7400 PA License - AB067198

As agents for years we have been telling our prospective clients to speak to a mortgage provider and to get preapproved as the first step in searching for and buying a home.

Mix of people listening to a speaker

Most prospective buyers know this and dutifully speak to a mortgage provider and get their preapproval for a mortgage and with this in hand then contact a Realtor to help them buy a home.

But something has happened over the last few years that no longer makes that pre-approval of any value. For the past three years, agents have been talking about the low inventory of homes for resale, as well as the lack of new construction as well. This combined with low interest rates has made it very difficult to buy a home in today's market. The low inventory, combined with low interest rates has created a very strong sellers market where there is lots of competition for homes for sale. The number of buyers has increased, and the seller can pick the cream of the crop.

Frustrated man 

Buyers are frustrated as they make an offer only to discover there are multiple offers, sometimes as many as twelve or more on the property they want to buy. Agents are telling them they will need to offer well over the asking price. Some buyers are getting help from parents, or some have sold their previous home and have cash. That pre-approval is no longer as valuable as it once was. Buyers are finding they are losing out many times over.

So, what can you do? Prosperity Mortgage, owned by Long & Foster Real Estate, offers clients the chance to get fully approved for a mortgage barring the appraisal on the house. The buyer has a full commitment from the mortgage company and can make an offer with a shorter time line to settlement as all the underwriting has been completed, barring the appraisal. It allows a buyer to be in a stronger position, potentially waiving the mortgage contingency making them as good as a cash buyer.

It does require the buyer to supply all the documentation ahead of time, and if the home search takes time, it will need to be updated along the way, but it puts you as a buyer in a much stronger position to have your offer accepted.

Money - cash

So, in today's market, go the extra mile and get yourself fully approved, and obtain a full commitment from your mortgage provider. If your mortgage provider doesn't provide this, contact Nick Vandekar, Selling the Main Line with Long & Foster Real Estate Inc. office 610-225-7400, cell or text 610-203-4543, Nick@VandekarTeam.com, let's get you ready to have your offer accepted and find that dream home. 

 

Posted by

 

Nick Vandekar
Nick is a Tredyffrin Easttown Residential and Commercial REALTOR selling The Main Line, Chester, Delaware and Montgomery Counties.

Giving you the confidence to make
the right decisions.

92 Lancaster Avenue
Devon , PA 19333
SellingTheMainLine.com
Mobile: (610) 203-4543 [call or text me]
Email Me

 

My Blog

   

If you are buying or selling on or around
Tredyffrin Easttown or along the Main Line, 
we can help you, contact us.

Comments (11)

Paul S. Henderson, REALTOR®, CRS
Fathom Realty Washington LLC - Tacoma, WA
South Puget Sound Washington Agent/Broker!

I have started questioning the validity of some pre-approval letters. Most are not worth of the paper they are written on and are mass produced stating what the buyer needs to provide to validate Nick Vandekar, 610-203-4543 

Jan 27, 2021 09:37 AM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good afternoon Nick Vandekar, 610-203-4543 ,

Excellent advice! Winning the bid in these multiple offer situations means a strong Pre-approval letter! Obtaining a full commitment from your mortgage provider is essential!

Jan 27, 2021 11:59 AM
Lawrence "Larry" & Sheila Agranoff. Cell: 631-805-4400
The Top Team @ Charles Rutenberg Realty 255 Executive Dr, Plainview NY 11803 - Plainview, NY
Long Island Condo and Home Specialists

Yes it is a sellers market and homes are selling quickly. This is a good suggestion Nick!

Jan 27, 2021 12:22 PM
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

Good morning, Nick... I've been insisting on full pre-approvals from my buyers for some years now... and I have a number of lenders who will do this... really makes your buyer stand out in a multiple offer situation.

Jan 28, 2021 03:33 AM
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

This is very good information to share with prospective home buyers.

Jan 28, 2021 05:06 AM
Rocky Dickerson
Realty One Group - Las Vegas, NV
Superior Service!

Good morning Nick Vandekar, 610-203-4543 you have got to love innovation like that

Jan 28, 2021 06:20 AM
Nick Vandekar, 610-203-4543
Long & Foster Real Estate Inc 610-225-7400 - Devon, PA
Tredyffrin Easttown Realtor, Philly Main Line

Paul S. Henderson, REALTOR®, CRS I have seen some commitment letters like that as well. I once had one sent to me that stated clearly it was not a commitment and the mortgage broker explained to me as if I was stupid, that all their commitment letters were worded that way. It did settle, but I did not like the situation.

Dorie Dillard CRS GRI ABR anything a buyer can do to put themselves in a better siutation is important..

Lawrence "Larry" & Sheila Agranoff. Cell: 631-805-4400 thank you, I have been suggesting it for sometime but do not hink most buyers realize how they are doing themselves a dis-service not getting fully approved.

Nina Hollander very wise.

 

Jan 28, 2021 08:12 AM
Nick Vandekar, 610-203-4543
Long & Foster Real Estate Inc 610-225-7400 - Devon, PA
Tredyffrin Easttown Realtor, Philly Main Line

Roy Kelley always trying to give worthwhile advice to buyers so they can be successful.

Rocky Dickerson anything that gives my buyers an advantage.

Jan 28, 2021 08:13 AM
Debe Maxwell, CRS
www.iCharlotteHomes.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
The right Charlotte REALTOR!

Definitely the right thing to do in this market, Nick! Those who do this will always get better results in a bidding war. 

Love the comment, "sellers can pick the cream of the crop." I need to use this when encouraging buyers that this is the 'state of the union' these days! I rarely have trouble convincing buyers to do that but, on occasion, they have to learn by losing one! 

Feb 01, 2021 07:22 PM
John Meussner
Mortgages in AZ, CA, CO, DE, FL, GA, MD, MT, NC, NJ, NV, OK, OR, PA, SC, TN, TX, UT, VA - Fair Oaks, CA
#MortgageMadeEasy Fair Oaks, CA 484-680-4852

Great points, Nick.  ALL lenders should be doing this very thing, a buyer shouldn't even be allowed to move forward (it's a waste of everyone's time, including their own) without being approved in underwriting.  

Feb 18, 2021 02:23 PM
Mike McCann - Nebraska Farm Land Broker
Mike McCann - Broker, Mach1 Realty Farmland Broker-Auctioneer Serving Rural Nebraska - Kearney, NE
Farm Land For Sale 308-627-3700 or 800-241-3940

I have all my buyers start the loan process however NONE can get full approval on a mortgage without a home.  I try to get the strongest approval I can but NONE are final until appraisal is complete and all conditions are met.

I suspect that all of your buyers have to jump through the same hoops as mine and that includes followup on employment prior to closing; inspection contingencies, flood certification, and so on.  So the only full approval is really after all papers are signed.

I will keep doing what my trusted mortgage officer recommends. By the way he is doing my daughters loan and it closes next week...thanks to him doing a ton of extra work with me due to an unprofessional and crappy appraisal.

Yep...appraiser did not have my daughters name spelled incorrectly...had the wrong sales price, used a comp that was sold by a grandson to his grandpa for $50K less than the grandson paid for it 2 years ago that bordered against the Dad's pivot...so not arms length.  Wrong street view photos,  has a walkout and appraisal said No walkout...has a roof line covered upper level concrete patio with a safe room under it and the appraiser said it was a wood deck with storage...has a $35,000 custom metal roof system on it that was described as asphalt shingles.   Lordy...I could go on but will save that for a blog.  And yes...I am filing a complaint with the state appraisal board.   

Wondering if  Loan Approval contingent on that appraisal would have meant we could close lol...actual answer? No 

We did a 2nd appraisal and it came in above contract price.

Value of real Pre-Approval? That is the only reason we got this bid. Yes we were highest...but the letter is what put over the top. 

Feb 18, 2021 03:06 PM