Chicago Area Mortgage Pre-Approval, Do You Need a Second Opinion?
16th June 2011
The first step in buying a home in today’s market, is to talk with a good loan officer and find out how much of a mortgage you can qualify for and if there are any obstacles you need to overcome before
you will be able to buy. This usually starts out as a short pre-qualification phone call, but before you start looking at homes you need a full pre-approval where you supply all your income and down payment documentation, and have the loan officer run your credit and go through your file with a fine tooth comb to make sure there isn’t anything there that will derail the process down the road. Mortgages are readily available and the mortgage rates are great, but the truth is that each mortgage loan is being scrutinized now like never before. When the housing bubble was heating up, underwriting was too easy. Underwriting is tighter now, and full loan approval means not only meeting the normal guidelines, but also the overlays or additional requirements that each lender now requires. This means that your loan officer needs to keep track of all the changes (and there are lots of changes) to the approval guidelines and know how to fit each borrower to the loan that is best suited for their unique situation. The reality is that this doesn’t always work out the way it is supposed to. A big part of my business now is working with borrowers who thought they were pre-approved to buy a home, but when they got their contract together, they found out they really weren’t approved after all. Now they are under the gun with a tight deadline to buy and having to start over.
In most cases, when you get a mortgage pre-approval, you are strictly dealing with the mortgage loan officer. Approving a mortgage is expensive, and without a property under contract it doesn’t make sense to take support staff away from transactions that are already in process to work on a deal that might never come through. So pre-approvals aren’t fully processed and don’t go through the underwriting process. The process in most mortgage companies is for the loan officer to ask a series of questions, request all the documentation, run your credit report and run all the information through an automated underwriting program to get a conditional or first step approval. When we get an approval with the automated underwriting system (this is either Desktop underwriter or Loan Prospector, Fannie Mae’s and Freddie Mac’s respective systems) the approval is subject to verifying all the information put into the system. In other words, the approval is only as good as the information entered into the system. If your loan officer didn’t ask all the right questions, or put in wrong information into the system, the approval is not going to be valid.
If there are any issues and you know what they are up front, you may have time to fix them and put yourself in a better situation. In today’s lending environment, you want to make sure you are working with someone who has the experience and knowledge to look for the hidden pitfalls, and be able to structure your transaction in a way that will put your situation in the best light. If you are just starting to look for a home and want to see how much you can afford, or if you have already been pre-approved for a mortgage but would like a second opinion, give me a call. I would appreciate the opportunity to help.
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Peter Thompson 630-479-6424
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the buyer can get a better price and terms when negotiating a purchase. This has been the rule, and in a market dominated by foreclosed and distressed properties, I am consistently seeing contracts come in well below the asking price, and usually with the seller paying for some or all of the closing costs. But I am now starting to see an odd new phenomenon – multiple offers on the same property. Multiple offers are usually a sign of a sellers market. A few years back at the height of the real estate boom, as soon as a sign was placed in the yard, a steady stream of buyers were there ready to buy. Homes were selling fast and multiple offers to buy the home were common. Back then, the most attractive homes in the nicer neighborhoods were getting the most interest and generating bidding wars, but nearly everything was selling.
neighborhood, there was already a line of people waiting to buy. Most homes, if they were in decent condition, received multiple offers to buy, and often sold above the asking price. At that time a good Realtor was someone who was connected to the Realtor community and knew who had the pocket listing that wasn’t on the market yet, so they could help their buyers find a property before it even made it to the Multiple Listing Service. On the mortgage side, nearly anyone with a pulse could get a mortgage, and there were loans available for anyone, regardless of credit, income or even if you had a job. It was too easy to buy a home and to get a mortgage then, but as we now know, this didn’t end well. Needless to say, a lot has changed since then.
going up. Again. Last fall
seriously, buying a home and qualifying for a mortgage is probably not an option. But for many people their credit has been damaged due to isolated life events. Too many people have run into problems over the last few years, often as a result of losing a job, medical issues or other traumatic events. For these people, the real frustrating part is that once their lives are back on track and they are back to paying their bills on time, it is still hard to improve their credit scores. To add insult to injury, mortgage guidelines have continued tightening over the last few years. A few years ago credit scores pegged 620 as the lowest level of good credit, that is, credit scores good enough to qualify for the best rate on a conventional mortgage. Now it takes a Fico score of 740 to get the best terms, and those with scores under 700 should expect higher rates or bigger fees.