By Kay Wilson-Bolton
February 21, 2006
If you want to see a seasoned REALTOR® move into action, watch them walk a seller through the process of reviewing pre-approval and pre-qualification letters attached to an offer to buy their home.
In reality, its only paper. The better lenders will provide a credit check, review income information and run the application by an underwriter.
Some lenders chat with a buyer on the phone for a few minutes, most will run the credit, but if the REALTOR® is pressing the lender for a pre-approval letter, there is little time for a thorough screening of a buyer’s buying capability.
When a buyer is pre-approved, it is for a specific loan program from a specific lender. Not all lenders offer all loan programs. You may need to get approved with a different lender or for a different loan program with the same lender, depending on your financing options at the time you buy a house.
The REALTOR® and the loan broker need to work together before an offer is written. If you think you will need to get re-approved for a loan, make sure to allow enough time for this in the purchase contract.
The pre-qualification is not a guarantee that a buyer will get a loan. The lender or mortgage broker is under no obligation to grant you a loan. Most pre-qualification letters state that a buyer appears to be qualified for a certain loan amount. There is usually a disclaimer to protect the lender or broker in case you fail to qualify. Before a lender will actually loan money, you must complete a loan application.
A loan pre-qualification is an informal process. After a review of your financial status, a loan agent or broker will issue a letter stating that if the information provided is accurate you should be able to qualify for a loan of a certain amount. Often, these letters are form letters. Even if a pre-qualification letter is personalized, it usually contains disclaimers to protect the loan agent.
Consequently, some real estate agents feel that pre-qualification letters are worth little more than the paper they’re written on and many of us will closely question the agent who presents one and the lender who writes one.
The best process is to literally “get your loan ready” before you look at homes. If your loan is ready, everything else will fall in line.
Kay Wilson-Bolton is the owner of CENTURY 21 Buena Vista and has been serving West Ventura County since 1976. She can be reached at 805.340.5025