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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.
Are You Really Prequalified to Buy a Home?
Just because a buyer is holding a preapproval letter from a lender, it does not mean that buyer is prequalified to buy a home in Sacramento. Of course, the buyer does not understand that because, after all, the lender issued the letter, what could possibly be wrong with it? I don’t have enough time in the day to talk about how many things could be wrong with that preapproval letter, but I’ll tell you this, no seller wants to find out in underwriting that a particular problem exists that should have been discovered before the darn approval letter was issued in the first place.
If you think these kinds of thing don’t happen, then you don’t work in Sacramento real estate. Faulty preapproval letters are almost becoming the norm. Each one is different, so a seller needs to read the letter to figure out if the lender even has a loan application from the borrower. The lender might not. The lender is not required to obtain a loan application in person prior to issuing a prequal letter.
We are presently working with a very sweet couple who hope to buy their first home soon. Like most first-time home buyers, they are filled with the excitement and a little bit of stress over finding a home. The home buying process is very new to them, and they aren’t sure where to start, but they knew enough to go to their local credit union and a major bank to get a loan pre approval letter before calling me.
Hot off the presses from the credit union, that pre approval letter was their ticket to viewing homes — because it meant they could finally write an offer if they fell in love with a home. The major bank was issuing the preapproval letter as well, although it seemed to be delayed by a few days. It takes only a few hours to get a preapproval letter from our preferred mortgage brokers.
Just to compare rates and service, we suggested the buyers call Dan Tharp at Guild Mortgage. He handled the refinance for my home a long time ago, and I’ve referred Dan Tharp for years. Honest, ethical, hardworking, devoted to the mortgage business and extremely smart. He verified the buyers and guess what? They are not pre-approved. The credit union made a big mistake. The buyers verified this with the credit union as well. They didn’t just take Dan’s word for it, although they could have. Because now Dan is helping them to fix that roadblock, and they will be back on the road to home ownership in no time at all.
Just because you are holding a pre-approval letter, it does not mean you are actually pre-approved. Not even if it comes from the biggest credit union in California.
