Lenders Trying to Find their Footing with New Financing Regulations
Now that the new good faith estimate and regulations are in effect, banks and other lending institutions are still trying to digest and implement the new changes. Each and every lender has interpreted the new regulations differently, which means with every lender you will get their own tweaked version of their new loan process. Having a different loan process is not such a huge deal unless the bank you’re working with has decided to cut out the most important part of the process, the pre-approval.
Big Banks Have Discussed Eliminating Pre-Approvals
As lenders begin to work through the lending guideline changes from January 2010, some bigger banks have discussed eliminating pre-approvals. Instead, they are opting to wait until a potential borrower is under contract before the bank starts looking at and verifying your income, assets and credit score.
Why Won’t Big Banks Issue Pre-Approvals Before Borrower Finds a Home?
Big banks want to stop issuing pre-approvals because they don’t want to clog up their system with pre-approvals that may not turn into real deals’.which means you as their customer are not important to them until you have entered into a legally binding contract with a seller to purchase a San Mateo home. Only then are the big banks willing to spend time determining if you qualify for mortgage financing. But….if you wait until you are under contract to get pre-approved, you could lose a lot of money and the house you love!
Why Waiting for a Pre-Approval is a Bad Idea!
The reason a San Mateo home buyer should get a genuine pre-approval is to make sure you will qualify for financing, find out exactly how much you can afford, and see if there are any red flags a lender may find before you start looking for a house.
As a home buyer, you should be confident that your income, assets and credit will qualify for mortgage financing before moving forward on a purchase contract with a seller. What some of the big banks are issuing are glorified pre-qualifications, really more like estimates at best, as to what you can afford. This means they may pull the plug and deny you financing!
You Could Lose a Lot of Money and the House You Want to Buy!
Typically you have 30 days from the time the seller accepts your offer to close your transaction. Why would anybody want to enter into a legally binding contract, put down 3% of the purchase price as a deposit, pay for inspections and appraisals (upwards of a $1000 or more), and to go through the emotional roller coaster of a purchase transaction only to find out at the end that you don’t qualify for financing? Wouldn’t you rather know that before you even start to shop for a home?
If you would have received your pre-approval at the very beginning, you can take out the unknown factor of “Will I be approved for this loan”? A genuine pre-approval will save you money, time and the anxiety of not knowing if you qualify for a home loan.
Smart Sellers and Listing Agents Won’t Accept Your Offer
The fact of the matter is smart sellers and listing agents will not even accept your offer without a genuine pre-approval letter. Listing agents who are representing their seller’s best interests will call the lender who issued the pre-approval and ask just how credit worthy is this buyer. They will also ask if the lender has verified the buyers income, assets and credit score and has been fully approved for the loan. If the lender answers no, most listing agents are going to advise their clients not to accept the purchase contract and find another buyer who is genuinely pre-approved and can confidently move forward with the transaction.
Your Pre-Approval Letter May Not Be Worth the Paper It’s Written On
If you’re reading this and are relieved because you’ve already received a pre-approval letter from a big bank, the first question you should ask yourself is, did my lender review my documentation?
If you did not supply your paystubs, tax returns, bank statements and agree to have your credit score pulled, and the bank gave you a pre-approval letter, all they gave you have is a glorified pre-qualification letter. This means your approval is not worth the paper it’s written on. So remember….pre-approval letter means verification of income, assets and credit.
When Should I Get Pre-Approved?
You should be fully pre-approved by a reputable lender BEFORE you start to even look for a house. You need to know how much you can afford before you start looking for a home.
Received an Approval from a Bank and Want to Make Sure It’s a Genuine Pre-Approval?
If you are already in the loan process and want to make sure you have a genuine pre-approval letter, give me a call at (650) 520-0915 or send me an email at info@SanMateoMortgageBlog.com. I can take a look at what you’ve received and help you determine whether or not you are pre-approved.
Learn your Mortgage Financing Options
If you’re not quite ready to go through the pre-approval process but want some information about what types of programs may fit your financial needs, we can schedule a time to sit down and talk about your options. There is no obligation or cost for this meeting. Call me at (650) 520-0915 or email me at info@SanMateoMortgageBlog.com to schedule a time to sit down and talk. I still fully pre-approve all my clients at the very beginning, well before they start looking for a home. It is the most important piece in the home buying process and will ensure a smoother and successful closing.
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Raymond Stoklosa, Chela Stoklosa and Rebecca Williamson are Realtors with The RayChel Realty Group specializing in Santa Clara and San Mateo Real Estate.
Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.
Raymond Stoklosa, Broker/Co-Owner
Chela Stoklosa, Realtor/Co-Owner
