Get Pre-Approved prior to working with one of our low commission real estate agents.
Many Buyers rush to an agent and immediately start viewing homes that meet the Buyer's criteria for what the Buyers think they qualify for. Some Buyers call a lender and provide only verbal information after which the lender issues a Pre-Qualification letter.
Some lender's letters merely state that based on verbal information received from the Buyers that they appear to be qualified. Then after the Buyers fall in love with a dream home they write an offer and deliver the pre-qualification letter to the listing Agent as evidence the Buyers qualify.
The Seller accepts the Buyer's offer and the Buyers start to celebrate with friends over the anticipated closing. A few weeks later in escrow the Buyers might be advised they do not qualify for the loan, the escrow is canceled and the Seller's home goes back on the market.
Experienced Sellers understand that the pre-qualification letter is in no way an indication of the Buyer's actual verified ability to qualify for financing and close escrow in contrast to a Pre-Approval letter. Some Sellers will even issue written instructions to the Listing Agent not to show their home unless the Buyers have provided a Pre-Qualification letter as "Lookie Loo" neighbors, unqualified Buyers or those with criminal intentions will have to settle for viewing the multiple color photos on this website.
Some Buyers find it hard to view homes until they have met with a loan officer and completed a written loan application and provided all supporting documentation to indicate the price range the Buyers actually qualify for shopping in.
The loan officer then quickly reviews the completed package, performs verification of items and only then issues a Pre-Approval letter which should include the following points (your agent can merely print off a PDF form attached to the MLS printout and email it to your loan officer for initialing):
1) Written on lender's company letterhead & dated within last 30 days;
2) Loan officer's (LO) name, cell phone #, office #, office address, email address and NMLS#*;
3) Buyer's name;
4) LO confirms Buyer(s) is Pre-Approved for a specified loan amount and loan type which matches the figures written on the RPA;
5) LO confirms receipt and review of Buyer's WRITTEN application(s);
6) LO confirms receipt and review of Buyer's credit report(s) and score(s). Buyer can for FREE run their own report and provide a copy to the LO. Buyer can complete this immediately;
7) LO confirms receipt and review of Buyer's bank statements verifying (via phone call or VOD request form) Buyer has the down payment and closing cost funds to complete the purchase (Proof of Funds). Banks can verify deposits within 2 Business Days;
8) LO confirms receipt and review of Buyer's signed Request for Verification of Employment form and of Buyer's W-2 forms (tax returns verified via Form 4506-T for self-employed) and paycheck stubs verifying Buyer's employment income. Lenders can verify employment immediately upon receipt of W-2 or paycheck stubs;
9) LO confirms Buyer's Pre-Approved Debt to Income ratio.
The LO keeps all of the Buyer's confidential information and verifications thus only providing the Seller with a Pre-Approval Supplement Letter.
There are more detailed explanations of the documents the loan officer will need from you.
Some Buyers insist their loan officer spends the time and effort verifying their loan application documentation before a purchase contract is accepted, instead of expecting the Sellers to spend the time and effort accepting an offer and pulling their home off the market while they wait for the lender to verify their loan application documentation.
If you do not provide a Pre-Approval letter which includes items 1 thru 9 above some Sellers might look at your Pre-Approval letter as just a Pre-Qualification letter and might simply reject your offer.
Buyers should get a Pre-Approval Letter for a few good reasons:
1) To ensure the safety of the Agent and the Seller's property. Working with Pre-Approved Buyers gives a level of safety to the Agent that the Buyers do not have criminal intentions towards the Agent or the Seller's home, as criminals are not known to provide all of the documentation to a lender in order to enter homes alone with an "easy target" Agent or to case a property for theft;
2) To ensure the Buyers have the best chances of getting their offer accepted. When the Buyers find the home of their dreams and immediately writes an offer the Agent delivers the Pre-Approval letter to the listing Agent. The listing Agent then contacts the loan officer to confirm the validity of the Pre-Approval letter and then informs the Seller that this offer has a much better chance of closing escrow after 30 days unlike an offer with or without a simple Pre-Qualification letter.
Remember when the Seller accepts an offer the Seller has to pull the home off the market for approximately 30 days while the deal works thru the loan funding, inspections and disclosures issues. To avoid falling out of escrow after 30 days simply because a Buyer failed to qualify for financing, some experienced Sellers will actually make a Pre-Approval letter a requirement of any offer, as these Sellers have chosen to only accept offers from Pre-Approved Buyers.
Another reason to at least start the loan process is Sellers determine the access to their home for their safety and to eliminate "Lookie Loo" neighbors or unqualified Buyers as no Seller wants unnecessary foot traffic thru their home. To accomplish this the Seller has the right to instruct the listing agent to not show the property unless the Buyer provides their lender's name, phone number and NMLS#* to the listing agent. The listing agent is then required to contact the lender to verify that the Buyer is actually in the act of getting Pre-Approved. Once the listing agent has confirmed that the Buyer is in-fact working with the lender the listing agent is authorized at that time to schedule an appointment to show the Seller's home.
We will continue to promote fair competition preventing monopolies in the real estate business for the benefit of all consumers as lower commissions keeps more of homeowner's hard earned equity in their pockets.
* NMLS: All mortgage loan originators must register with the Nationwide Mortgage Licensing System & Registry (NMLS). The NMLS Unique Identifier ("NMLS ID") is a permanent number that allows consumers and regulators to obtain information on registered mortgage loan originators through the NMLS Consumer Access website (NMLSConsumerAccess.org).
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