Prior to setting appointments for a new client, one of the first questions a seasoned Real Estate Advisor will ask (or should ask) is “will you be paying cash, or will you be dealing with a lender?”
If the answer is “cash”, then the follow-up question should be “will you need to sell your existing property in order to buy?” The customer/client answers concerning dealing in cash and needing to sell or not, will in turn lead to an entirely different conversation with the agent. (However, since this particular article is about dealing with a lender, I will save that conversation for another day of educational writing.)
If the answer is “we will be needing a loan”, then the agent will inquire as to whether they have already begun the loan process to become pre-qualified or pre-approved. If the client or customer has not begun the process and doesn’t already have a relationship with a great lender, then the agent should recommend lenders.The agent should recommend lenders that they themselves have a relationship with, and that the agent knows confidently will see to the needs of the customer/client.
Is there a difference in lenders? Absolutely! Aside from personal business ethics, each lender underwriter has different criteria for qualifying a buyer for a loan. The minimum credit score for banks with in house loans are not always the same as a mortgage broker with “options” for a variety of lending sources. Many mortgage brokers are able to pre-approve with a credit score of 580 and above, while banks typically require 640 and up. Credit scores are only the initial area of inquiry, but, often determine whether or not the lender has a product to meet the needs of someone in that credit bracket. A good agent will have a feel for which lender can most likely meet your needs for a loan or be able to offer a product to match your situation. Your real estate agent will also have a great working relationship with that lender. TEAM-WORK MAKES THE DREAM WORK!
Most loans are sold after closing and the lender you close your loan with is unlikely to be where you will actually make your payments. While you may want to be “loyal” to the loan officer at your bank or your friendly online loan agent, more than likely you will not ever deal with them once closing is over. That is why, a misaligned loyalty with the wrong lender can seriously delay or hinder or even cost you your closing.
Your real estate advisor will be the best source of which lenders have the best track record to close the deal for you! Ask your advisor for a recommendation or click here to be connected to a LOCAL lending source that can get you prequalified. Before you get too excited in your home search, it is a good idea to see what your income will allow you to comfortably purchase; you can adjust your parameters based on how much you want your monthly payment to be. Knowing the number before the contract is a much better plan than getting to closing and then “gasping” at the monthly payments.
A GOOD LENDER IS ESSENTIAL TO THE CONCLUSION OF THE PURCHASE CONTRACT!
Realtors and Real Estate Agents usually have a finger on who in the lending business they can trust with their clients. It is devastating to come down to closing and the lender has not kept up the process in a timely manner. Unfortunately it has happened! Your agent needs to have a local lender to deal with that when last minute things arise, that can more likely be remedied by a physical meeting. Long distance lenders may not answer the phone, or avoid returning texts especially if they have not followed through with their responsibilities. Local lenders know that their reputation is on the line as opposed to a online or name in cyber-space. Trust your agent on this and thus likely avoid last minute heartache!
SO WHAT IS THE DIFFERENCE BETWEEN PRE-QUALIFIED VS PRE-APPROVED (AND WHICH IS BETTER)?
Actually, even many real estate agents do not even realize that are two types of pre-qualification.
Type 1 PRE-QUALIFICATION is the lender has received verbal information from the prospective borrower. The lender depends on the credit score and the income information provided verbally from the prospective borrower. Nothing has been verified, but it looks like it should work.
Type 2 PRE-QUALIFICATION is the lender has received verbal information, but it has been substanstiated by written back-up. Could include pay-stubs, other proof of income, bank statements or IRS returns for example. Lender has reviewed it and it looks good, but it has not gone to underwriting or had any deep examination. It is just a cursory “look-see”!
PRE-APPROVAL on the other hand, has been submitted to underwriting and underwriting has in turn verified assets, employment and income of the prospective borrower. A pre-approved buyer is much further along in the lending process before even getting into a contract commitment.
Although most sellers do not realize their is a difference between pre-qualification and pre-approval, for obvious reasons a contract with a potential buyer to purchase their property is much stronger with a letter of pre-approval.
Ironically, most lower priced transactions will only require a pre-qualification letter, which is not always indicative of a buyer’s true ability to actually acquire financing. Realistically, a savvy Realtor, when listing a property should advise all home sellers to require a pre-approval before accepting a contract. Higher end buyers are more likely to have pre-approval in place before shopping for a property.
I WOULD LOVE TO BE YOUR REALTOR!
I can expertly represent you with either listing or buying!If you are thinking of buying, I have excellent lending institutions ready to issue your letter of pre-approval (or at the very least your letter of pre-qualification)! With this letter in place you will be ready to begin the search for your dream home or land.
GET STARTED WITH A GREAT LOCAL LENDER
I know these are busy times. To simplify the “pre-qual” process and to allow you to do this on your own terms and at your convenience; clicking here will direct you to a calendar for you to set your own appointment. Once you have your pre-qualification letter in hand, you will be able to confidently get your property search started!