Financing, while an easy process… has become more strict in its processes and lending practices. The good ol’ days of asset lending and stated income are gone (albeit not for good, but for a while). Mortgage lenders are requiring more information up front and they are checking it thoroughly.
Sellers are checking too. One of the most common failures in a home transaction is a financing issue either an appraisal requirement on the home’s condition or a short coming in the buyer’s financial or credit picture. Being able to submit an offer with strong approval letter is paramount to getting amazing deals and accepted offers.
Bank Owned Properties don’t always accept the highest, but sometimes the BEST offer when they are reviewing offers. Additionally, a Bank Owned Property Listing Agent wont even accept an offer without a solid approval letter (many want you to even approve with a specific bank despite your previous preapproval).
Non Bank Owned Sellers are also getting picky. PreApproved buyers are like gold, and to be taken seriously by sellers, having a letter in hand will put you on the top of the list.
As industry experts, great Agents (like us) know that in order to keep your deal together (as you expect us to do), we must make you go through all the proper planning processes when buying a home. Skipping one could cost you the deal and cost you extra money unnecessarily.
Case in point. Buyer A wants to buy a house but doesn’t want to talk to a lender until he finds a home. Buyer A finds a home after several weeks of looking, and wants to place an offer. Buyer A frantically calls a lender who requests:
- A lending application
- 2-3 months bank statements
- 2-3 months bank stubs
- pulls credit report
- in some cases 2 years of tax returns
- among other required items
Buyer A frantically spends 2-3 days rounding up the information to present to the Mortgage Lender. Given a preliminary green light, the Mortgage Lender issues a Pre-Qualification Letter (not a Pre-Approval / difference described here).
Buyer A submits an offer with his agent and his Pre-Qualification Letter. The offer is accepted. The Mortgage Lender moves the file into underwriting and Buyer A begins home inspections (in the Spokane Area these run $300-400).
During underwriting some problems occur, the Mortgage Lender determines they do not qualify for the home and the deal falls apart. In most cases the Earnest Money is returned, but the money spent on the home inspection is gone forever, worst yet, when Buyer A finds another home that they can afford, they’ll need to order an additional inspection and spend an additional $300-400.
There are countless stories of this happening. When your agent asks you to get pre-approved in your initial meeting, they aren’t doing so JUST to qualify you as a buyer (it’s our job to help you through the process correctly anyways), we’re doing this to prevent COMPLETELY PREVENTABLE failures during the process.
Any questions or a referral to a rock star Mortgage Lender.