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The Main Reason for a Preapproval Letter
A stack of 700 francs from French Polynesia sits on my desk. Primarily because I can’t throw them away, and I don’t know what else to do with them. They are pretty much worthless. People who exchange money for a living don’t want them because they are coins. If I were back in Bora Bora, these 7 coins might buy me two diet Cokes. But here? Nuttin’. Just like some home buyer who wants to write an offer without a preapproval letter — that kind of purchase offer would be worthless, like my pile of francs.
Yet, I know that home buyers struggle with the issue of obtaining a preapproval letter. Heck, even my neighbor doesn’t understand why she should get a preapproval letter. She says when she finds a home she wants to buy, she’ll get a letter. This is why she might not ever buy a house, though. Because by the time she finds something to buy, there will be a dozen other home buyers wanting to buy the same house, and no seller in this market will accept an offer without a preapproval letter to accompany that offer. So, my neighbor is at a huge disadvantage. She doesn’t want to hear about the market in Sacramento or how to buy a home in Sacramento. She has her own ideas about how it’s done, none of which are working out very well for her.
After all, she only buys a new home once every 30 years. We Sacramento real estate agents write offers for clients every week. Real estate is our business. We want to help our clients not hinder them.
This is a seller’s market in Sacramento. No inventory. Lots of buyers. This market is very tough for buyers. It’s more important now than ever to get a preapproval letter before buying a home. Not only does it tell you how much you qualify for, which doesn’t mean you have to go for the max, btw, but it assures the seller you have the means to close. It says you are serious and not some lookie-loo. Besides, sellers don’t accept offers without a preapproval letter. The preapproval letter is not for your agent. It’s for the seller.
The question might be where does one get a preapproval letter from? For starters, it should be from the lender where one intends to get a loan. Moreover, it should be from a lender who can perform. The two aren’t necessarily the same. Lots of home buyers want to go to their own bank or their own credit union to get a loan, and that’s probably the worst place to go. The reason is there is no guarantee that their own lender will perform. They all have access to the same bag of money, basically, but some lenders guarantee performance and some do not.
Why is performance important? Because a purchase contract is typically written for 30 days. That means the buyer must close escrow within 30 days of the seller’s acceptance or the contract expires. If your bank can’t close on time, the seller has the right to cancel. And you know what? With prices going up, sellers are canceling contracts that have expired. Yup! I’ve had it happen twice when representing the seller. The other agent’s buyers struggled to close because of this or that or some other thing and asked for an extension. Instead, my sellers canceled. The buyers had no say at that point. The contract time period had expired and it was within the seller’s rights to cancel. Do you want to lose your home because your lender can’t close on time?
You might want to ask your agent for a couple of recommendations. Real estate agents know which lenders perform because they work with those same lenders over and over. In case you’re thinking that agents get kickbacks or some other kind of incentive to recommend a lender, think again. That’s against the law. The only reason for an agent to recommend a mortgage broker or lender is performance. Period.
It Takes a Village to Close a Sacramento Escrow
Pia is stressed at the vet.
Welcome to home buying stress. Anybody who is buying a home in Sacramento today is stressed out. I don’t care who you are. There is no way to buy a home and not be stressed about it, so don’t feel alone. Even if you’re lucky enough to have beat out all of the competition and get your purchase offer accepted, you still need to get through underwriting. Lenders are much more strict than they were 5 years ago, more restrictive than a year ago or last month, it seems. Just because your lender says you’re fully approved does not mean you will get a loan.
I’m not trying to give you one more thing to worry about but getting approved by underwriting is a concern. I had one seller cancel an escrow a few months back because the buyer asked for too many extensions. It wasn’t even a short sale, it was a home with equity in Elk Grove. No matter what the buyer did, she could not close her loan. The reason she could not close her loan was because the IRS was backlogged. She needed her tax returns from the IRS. She couldn’t get them. My seller got tired of waiting and canceled. I didn’t blame her.
Another buyer in Lincoln could not close on her approved short sale. Something happened to her financial situation so the USDA loan she was trying to get was no longer a reality. She could not afford the FHA loan under its program terms, so she ended up losing the house. She lost her earnest money deposit, too, if I recall correctly, or maybe they are still fighting over it. My seller sold to another buyer who could perform.
Just last night, a Roseville buyer found out her “fully approved loan” did not pass underwriting. She needs to now haul in her parents to be cosigners, which means escrow will be delayed. All I can say is thank goodness this escrow is not a short sale and we don’t have to beg and plead with a short sale bank for a short sale extension that we may or may not receive. My seller expected to close this week, and now she will have to wait another couple of weeks or start with over with a new buyer. Oy.
My cat Pia is feeling very stressed. In fact, I had to rush her to Davis last night for an emergency vet visit. We are not ruling out a urinary tract infection but it could just be stress. She is stressed for a number of reasons. The vet says my work stress might affect my cat. Working as a Sacramento real estate agent can be stressful, even if it’s suppressed. Who knew stress could transfer to your pets? She is also very upset because I sold the dining room table, not to mention, her buddy, my husband, has been unavailable to her. Her environment has changed. Cats hate environmental changes.
The real estate environment has changed in Sacramento. This is not your mother’s residential resale market. It’s a world with wacky mortgage and appraisal guidelines, extreme competition, not only from other home buyers but from cash investors; and very few homes for sale. Better hope you have a good real estate team on your side. Believe me, it takes a village to close escrow these days. I won’t sugarcoat it for you. But the Elizabeth Weintraub Team will do everything in our power to get your escrow closed.
