Pre-approvals require commitment and documentation. It Matters!

I wanted to take a moment to address what it really means to get pre-approved. There are several thoughts out there and many may believe a little differently than I do. However, I am writing this to you the consumer. The times really have changed and the requirements to buy a home have come back in line with reality. Investors really want to make sure that you can AFFORD the home. This has lead to increased scrutiny of income and employment, time on the job, the line of work and overtime, bonus and commission paid.

1. Loans Officers still do pre-quals sort of and does that benefit you – The goal is to be able to buy a home. A pre-qual is nothing more than a conversation and some details being exchanged to determine whether or not you roughly fit in the box. There is limited analysis of items that are important to the overall ability to borrow. Many times the borrower says I make 5K a month. The Loan Officer fails to ask if this is W-2, 1099, this year only, consistent, paid hourly, bonus, commission, flex pay, cafe 125 accounts and many other items that could play a factor in the debt to income. They then send you on your way to look at homes and you get in contract only to find out of the 5K only 4K is acceptable. The bonus that you receive has only been this year and there is not a two year history. Now that house is history and the excitement has been lost.
2. Consumers must plan for a good experience – If you want to have the ultimate purchasing experience that is allowable in today’s market you must be ready. You would not go to Disneyland without reservations to a place to stay and an idea of what you were going to do on what day. Plans do change but a plan is in order. To get the best experience buying a home I suggest that you plan on doing the following: -Take time to put together exactly what the Loan officer request. The items should include but are not limited to: 2 years of Federal Taxes all pages and all schedules, two years w-2’s if applicable, current pay-stubs spanning 30 days, two months bank statements ALL PAGES, current statements for assets like stocks, IRAs, etc ALL PAGES!!!! - Answer a lot of questions without getting frustrated. The questions are asked to make sure that the package is presented to the source of funding appropriately. – Take time to speak with your Loan officer about all the options and get a worse case scenario for the cash you will be required to have available to make this happen.
3. Consider the Financing your solid Foundation – Without the money you wiull not be able to buy a house. A house cannot stand without a solid foundation. Assuming that you make plenty of money or are good will lead to heartache. There have been several situations that I have been called by Realtors on Transactions they are working on with Lenders. Those questions go something like this: “Matt, can I pick your brain for a minute. I have a client that is working with (XXXXXX) and the have a 780 fico score, make about 200K a year, have more than 20 % down and the bank is asking them to provide such and such. They cannot provide a full year as they did not keep this stuff on file. They have 8 months not a year worth. Is this going to kill a deal or is there a way around it?” I have seen the most qualified of buyers be put through the ringer. The underwriters want to make sure that if they sign on a loan with their name they have gotten every piece of paper that the investor may want. Falling out of escrow is everyone’s worst nightmare. Do yourself a favor by putting in the work upfront, take your time and then go look. You will not miss out on the home of your dreams if you take an extra day or two to do your due diligence.
4. Don’t worry about the past! – The past is that and it will not be re-written. Lose all ideas of how things were done in the past and do not listen to the opinions of those that bought in 2003-2007 because things are completely different and all that advice is out the window. Learn about what it takes to but in today’s market from industry professionals. We are here because we work hard at understanding our businesses. Don’t believe everything that you read on a blog and yes that includes mine. Some of it is opinion or it would not make a good story. Read and research and be a kid and ask LOTS OF QUESTIONS!!!!!!!!!

Summary – when it comes to getting pre-approved help us help you. Three tips:

1. Provide all the documentation
2. Take time to meet and ask questions either in person or on the phone
3. Do not rush as this will cause delays. Do not cut corners.

Thank you for reading. Until next time.