Oregon Mortgage News

One of my favorite movies, "O Brother Where Art tho?"has a recurring statement by Holly Hunter to George Clooney. While she is married to George Clooney, he's recently escaped from the chain gang and she wants to marry a proper man. She keeps referring to her new love as "Bonafide". He has a real job and is a sure thing. He is genuine.  Responsibility to her children has over-ridden any love or emotion.

Whether you are a Realtor, Home-Buyer or Home-Seller, you have a vested interest in making sure that the offer that is being submitted for the purchase of a property is bonafide.  Traditionally, a potential buyer gets a pre-approval letter from a lender indicating that they are pre-approved for a loan at a certain amount. But not all pre-approval letters are equal. Nor do they guarantee a smooth close. Here's why.

1) A pre-approval letter is not worth the paper it's written on if you do not know and trust the lender. Even then, it's not a guarantee. It is not binding on anyone and is only as good as the work that was done to give the pre-approval. This isn't to say that a pre-approval letter should never be accepted, or that every lender is a liar, but it's not binding. Mistakes can happen, or things surface that were not known. 

2) A DU (Direct Underwriting) finding is better, but is still not binding. It shows that the lender has at least taken a full application and that the on-line origination system has given it an approval SUBJECT TO verificationof all pertinent information. In other words, prove what you have stated is fact. But the loan has still not been submitted to a lender nor has an underwriter verified the information or an offer to lend been extended.  Also, a pre-approval letter could be generated with this information.

3) A Conditional Approval is even better, but is still not binding. The file has been submitted to underwriting and an approval has come back with the outstanding conditions. These could still include many borrower related issues that could stall or kill an approval. 

4) A credit approval from a lender with all borrower conditions signed off on is money in the bank!! If this hasn't happened prior to a buyer looking at houses it still should be able to happen within the 10 day inspection period. Realtors, give yourself protection by writing this into your agreements. Make sure that you have a credit approval with all borrower conditions signed off within that same time period that a buyer has to walk away. If all conditions are not met, at least you can see what is outstanding and make a judgement decision as to whether or not you want to move forward.

5) A Public Records search on the Borrower will reveal their ability to purchase, or any potential red flags. This also should be able to be done during that 10 day period if it hasn't been done prior to looking at homes.

With a Credit Approval with all conditions signed off and a Public Records search showing that a potential buyer does not have any liens or judgements against him/her,  a potential buyer now becomes a solid borrower with the ability to close quickly. All responsibility now shifts to the seller and the ability of the property to be financed.

Buyers -Put yourself into the strongest possible position to buy. Work with a lender who will get you a true pre-approval... a Credit Approval with all conditions signed off. Take the extra time to have your credit examined. You might be surprised at what a a few points to your score could do to improve your interest rate and your purchasing power. Spend a little extra to get a Public Records search to confirm that you don't have any surprises that you are unaware of. Mistakes can happen. What you don't know could cost you your dream home.

Buyers agents- Time out!! Put your buyers long-term needs before their short-term desires. Get them "Bonafide". Several of my lenders will give a credit pre-approval with a property to be determined. I even have two who will allow me to lock a rate without a property. One will allow for rate extensions with a re-lock at a lower rate. Protect yourself and make your borrower stronger by requiring that their lender gets this done. It takes a little more time, but strengthens your deal. Ask your escrow officer to do a Public Records search. Again, protect yourself and strengthen your bargaining position.

Also, please, please, please give us loan officers the time to get your borrower pre-approved. If we get a call Saturday afternoon about a new client who has a few credit issues and wants to make an offer on a house, don't expect a rock solid pre-approval or the best rates. At least give us a few days to be able to work our miracles.

Listing Agents- Take your due diligence a step further, but please show grace as most Realtors/lenders will not be on the same page and might be offended. Suggest that it would strengthen their offer if these things were done. Ask them "Is your buyer Bonafide"?

With a little more work up front, there should be very few deals that fall apart at the last minute because of borrowers with surprises.  

Call me. I make buyers bonafide. 503-421-0096

Larry Morris can be reached at larry@PDX-Mortgage.com . His website is http://www.pdx-mortgage.com/ . This material is copy protected 2007 by Larry Morris, Mortgage News that Matters. All Rights Reserved

Licensed in: OR, WA,

When is a Mortgage Pre Approval not a Pre Approval?

There is a lot of discussion about the need for a pre-approval letter when buying a new home. Most Realtors will not accept an offer on a home without one, and many will not even show a home. But what is a pre-approval letter and is it really any good?

First, we need to look at the difference between a pre-approval letter and a pre-qualification letter. A pre-qualification letter is really just the Loan Officers hunch that the borrowers are good for the loan and that a lender will probably give the borrowers a loan. They have answered a few questions correctly, have decent credit and appear to have the income necessary to make the payments.

A pre-approval letter is supposed to be more in depth and based on an actual analysis of the borrowers ability to get approved according to the underwriting guidelines that will be used by the lender for the loan selected. It often involves running the application through an on-line approval engine to get an accept or decline. With this information, a loan officer can write up a pre-approval letter and have reasonable confidence that the loan will be approved by a lender. But there are still risks.

Many Pre-approval letters are nothing more then pre-qualification letters with a pretty face. The loan officer was either to lazy to run a thorough analysis, or was rushed by a Realtor, or borrower, to come up with a letter now so that an offer could be made. In addition, the information used to obtain the on-line pre-approval might not be accurate. Often the information has not been verified by the loan officer, let alone the lender, or the information is calculated differently by the lender and ratios or reserves are no longer sufficient.

The only true pre-approval letter is the Conditional-Approval issued by the lender with all borrower conditions signed off. This becomes a commitment by the lender to loan to the borrower with an acceptable property. The only outstanding issues should be property issues: Purchase Agreement, Title and Appraisal. While it takes more time, it is as good as money in the bank.

But there is a hitch, most lenders will not give a Conditional Approval without a property address. This means that in many situations you need to rely on the loan officer to provide an accurate pre-approval letter based upon an on-line approval.

If so, ask questions. Has the Loan Officer reviewed the information in the application to confirm that they are correct? Have they contacted the employer to verify occupation? Or the Landlord to verify rental history? Are there any isues on the credit report that could affect the loan? What are the potential hitches in the pre-approval that could prevent it from being honored? After all, if you are a Realtor it's your commission. If you are a buyer, it could be your home...and the loan and rate that you end up with.

Better yet, find a Loan Officer who works with a lender who will give a pre-approval with a "property-to-be-determined". I have one. It's a national bank with great rates and programs. They will even allow a rate to be locked without a property and their adjustments for 45 or 60 day locks are minimal.

Call me for your Sherwood Oregon Home Loan.

Larry Morris can be reached at larryPDX-Mortgage.com.com. His website is www.PDX-Mortgage.com. This material is copy protected 2007 by Larry Morris, Mortgage News that Matters. All Rights Reserved

Licensed in OR, WA