Top 3 Loan Preapproval Mistakes by Sacramento Home Buyers

The biggest loan preapproval mistake is plucking an out-of-state lender off the internet.

Sellers’ agents in Sacramento insist that the buyer submit a loan preapproval with the purchase offer. They want to see that the buyer is qualified to purchase the property and has at least taken the steps to talk to a lender. But the letters themselves don’t guarantee that the buyer will get a loan.

If you want to give a Sacramento home seller ammunition to reject your purchase offer, here are three things you can do to mess up your loan preapproval process:

Choose an out-of-area lender. There is nothing inherently wrong with an out-of-area mortgage broker, but listing agents typically won’t know the lender nor its performance record and, let’s face it, there are a lot of loosely-defined mortgage brokers practicing. Listing agents and their sellers don’t want to watch the transaction fall apart because the buyer tried to get a loan from a lender that could not perform or did not fully vet the buyer.

Submit a prequal letter instead of a preapproval letter. A prequal letter says the lender has had a conversation with the borrower. A loan preapproval letter generally discloses the lender has a completed loan application, obtained the buyer’s credit report, approved it, ran it through actual or desktop underwriting and reviewed the buyer’s documentation. It speaks volumes.

Attach a loan preapproval letter that shows the buyer is qualified to pay more than the asking price of the home. Nothing says to the seller: “Let’s issue a counter for a higher price” faster. In fact, the mortgage broker I work with emails me the preapproval letter in a Word format so I can immediately lower the price, if necessary, before submitting the offer.

I always suggest that my buyers compare rates and terms among lenders, although I have no stake in the lender the buyer ultimately chooses. That’s the buyer’s decision to make. But I do want to submit the buyers’ offer in the strongest light possible, and that means submitting a preapproval letter (not a prequal) with their offer.

If your lender can’t or won’t issue a preapproval letter, then you might want to look for a lender who will. Don’t sabotage your efforts to buy a home by making these loan preapproval mistakes. Call Sacramento Realtor Elizabeth Weintraub at 916.233.6759 for a recommendation to a local Sacramento mortgage broker.