Approval letter instead of Pre-approval or Pre-qualifying letter
Last week at a Freddie Mac seminar, I meet a group of Freddie Mac staff. they said that all REALTORS in the St. Louis Metropolitan will only work with buyer that have a 100% Lender's commitment and/or real approval letters. I like that and hope it is real. It is not only a good protection for us REALTORS to work with qualified buyers, it is also a protection for the consumers "Buyer Clients" as well as "Sellers Clients". Just imaging the disappointment and emotions buyers and sellers go through if at the last minute at the closing table, they find out that they can not buy or sell. Or even worst scenario, buyer is under contract with a lender's promises of no prepaid penalties and 6% fixed interest, at the closing table buyer finds out that he will have a 10% APR with $5000 prepaid penalties. What can this buyer do? If buyer rejects to close then chances are to loose the earnest deposit, the inspection costs and the chance to get accused by the seller.
I am wondering what other REALTORS would have to say about this wonderful idea. That is a common real estate practice in Europe.
Timo Yannopoulos
CRS, GRI, e-PRO, AT HOME WITH DIVERSITY
Approval letter instead of Pre-approval or Pre-qualifying letter
7 comments • Timo Yannopoulos • August 27 2008 10:46AMComments
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Yep, very sad and it happens much more than people know. I get my buyers approved before they shop....
An approval letter certainly eliminates wasted time.
In my case, some of the buyers I deal with say they want to find the home first before getting approval. That is so backwards. I show them one home so they can get used to me then I get their info to submit to the loan officer. I know this sounds crazy but I don't do that too often.
I've got one in escrow right now with a pre qual letter that has turned into a nightmare because of buyer credit issues and a buyer and buyer's agent that aren't getting them worked out -- they've already had TWO MONTHS -- we're supposed to close on 9/1/08 and they still aren't done -- my seller has completed everything ! ~ Evelyn
Pre-approval, even with conditions, is obtained prior to touring homes. I haven't met many buyers that truly know what they are qualified to buy so it makes sense to nail down the correct price range before searches are run or tours are scheduled.
I have yet to see an unconditional approval letter and would likely question it's validity if I did. If credit has been run, money in the bank confirmed, assets and income verified, I am satisfied with the pre-approval.
Hi Timo,
Amanda Hall hit the nail on the head with her comments. BUYERS need to know what they are QUALIFIED to BUY!
It is important for buyers to be pre-approved to know what they can afford and what the mortgage payment is going to be in the price range they are looking at. A pre-approval meeting is a good time for the lender to establish a relationship with the client and explain the mortgage process for a smoother transaction for everyone.