Consumer - "I have been approved for that mortgage."
Me (loan officer) - "How do you know this for sure?"
Consumer - "Because I was told by the loan officer that they ran it in their system and it came back with an approval."
Me - "That sounds great. So did you show them all of your information, your pay stubs and bank statements?"
Consumer - "No, they had my information from before."
Me - "Okay, I am confused. They said that you are approved, but they didn't physically see any of your W-2's, pay stubs, or even your bank statements?"
Consumer - "No..... what's the big deal then?"
Me - "Sorry for the chuckle, but you aren't approved. Let me explain to you the whole process from start to finish."
I wrote this blog a few weeks ago :The difference between a Pre-Approval and a Pre-Qualification letter. I wanted to bring this up again because this just happened to me last week. As many have mentioned, we not only need to educate the consumer, but others within the real estate business. As PROFESSIONALS, we need to RAISE the bar & educate consumers.........
Getting back to the issue. My client had been approved by two other lenders. Most lenders have a system call DU or LP. DU is Fannie Mae's automated Desktop Underwriting technology. LP is Freddie Mac's version which is called Loan Prospector. These tools allow lenders to put your information into the computer in order to get a loan approved or denied. Some companies have their own versions. These systems will look at your credit, income, years on the job, etc etc and match it to the proper guidelines written for the loan program that you are being approved for.
The main thing to remember here is that your information is being inputed by a human. It doesn't matter if it's the loan officer or the the processor, mistakes can be made. Most importantly, an underwriter needs to review the information to make sure if was inputed correctly. In the case of my client? I asked to see his pay stubs. As I reviewed them, my mouth dropped open when I noticed that they were from his brother, in his brother's name, and not the company that he works for. This could become a major issue for several reasons. The computer isn't going to know this. Hence the reason why I said, "you aren't approved."
I just have a problem with consumer's being misled. I always state that I am not perfect nor god. But know your job at least. Be upfront with consumers and clarify things when talking to them. Have you ever been told that you were approved, later to find out that you aren't?
Another must read : The difference between a Pre-Approval and a Pre-Qualification letter.
Updated Blog - 7-23-09 : Pre-qualification letters vs pre-approvals letters and knowing what a commitment letter is....
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Copyright © 2007 by Jeff Belonger of Infinity Home Mortgage Company, Inc