Being Pre-Approved is a Must-Have!

In most real estate markets today, if a residential property buyer isn’t fully pre-approved for a mortgage loan, the chances of any seller taking that buyer’s offer seriously is very slim. The reason is probably obvious, but a pre-approval is validation that the loan has been pre-underwritten (or at least it should be), which provides the seller confidence that the transaction will close. In order to become pre-approved, all information submitted on the loan application has to be verified by documentation provided by both the borrower and third parties. In fact, the average file today has over thirty components to validate a loan approval — 30+ components — more than half of which are third party!

pre-approved-loan

A pre-qualification is nothing more than a discussion around a buyer’s loan qualifications. For example, if one uses the AMB 5X Rule, which states that five times one’s gross annual household income equals the approximate loan amount one qualifies to receive, then we know that a $100,000 salary means that one may be able to afford a $500,000 loan. But then employment, income, assets, credit, obligations and declarations all need to be discussed to refine one’s qualifications. Taking the next step towards validating everything then fully vets a buyer’s true qualifications and approval allowances.

Most importantly, the biggest benefit to the pre-approval process is that it empowers the buyer to execute confidently. Think about it; if one has had a thoughtful, detailed discussion and analysis around the largest loan one will likely have, both short and long-term goals need to be taken into consideration. Questions around future employment, lifestyle, family planning, retirement, cash flow, housing goals, etc. all need to be taken into consideration to effectively pre-approve anyone and get them truly excited about a new property purchase. Doing so benefits both buyer and seller and makes for an ideal transaction.

Contact your favorite Absolute Mortgage Advisor or visit us at www.absolutemortgage.com for more information.

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How a Property Purchase is Like Crew

Every lender on the planet has been asked the question of, “When can you close?” at least once.  Is it just me, or is it somewhat interesting that somehow the lender, who is only one component of a complex transaction like real estate, is the one responsible for when a transaction closes?   After all, the parties include: buyer, seller, listing agent, selling agent, escrow officer, title officer, various inspectors, appraiser and lender.  Like a well-trained crew, if all parties cooperate and row at the same time, the vessel moves fastest.  And when any one party is having difficulty, it affects everyone, as well as the pace and direction of the vessel.

“No, really, when can you close;?)”.  OK fine, put a gun to my head.  The answer is, in all truth here, that it depends.

John Cannon recently closed a $2mm transaction across two properties in ONE week.  Jason Beecham and Scott Chase recently closed deals in 21 days or less.  One transaction that had every chance of closing in 21 days had a nagging 2nd mortgage on the property, and the lender of that 2nd mortgage was very uncooperative about issuing the proper forms to release the lien.  As such, the transaction didn’t close until day 35.

No doubt, the lender is a critical member of the transaction and certainly has much influence over the timing of a transaction.  And like any member of a crewing team, the one with the most experience, solid control, greatest communication skills and strength will certainly help the team cross the finish line first.

Help, I Applied for a Mortgage and Can’t Get Up!

Why is it that some lenders are closing real estate transactions  in less than 21 days, yet some refinances are still in the works from last year?  Why is it that an expense check that was deposited in my bank account last month is being sccruitinized by the underwriter and requires explanation?  Why does my lender hate me?

While the process of obtaining a mortgage has tripled in complexity, if we all do a better job of setting the proper expectations, we can all endure the process better.  Some things to keep in mind include:

1. your lender doesn’t hate you– she/he is in the service business and genuinely wants to serve you best

2. the more complex your financial situation, the longer it takes to get through the review process– think of the time it takes to read through the latest, best-selling novel versus War and Peace

3. A “Jumbo” loan is manually underwritten whereas a conforming loan has automated underwriting, which is the difference between an almost instantaneous decision and a decision that takes at least a day

4. large “Jumbo” loans may require up to two appraisals, which can be a two-week process

5. make certain that you disclose literally everything that may impact your application, i.e. change in job or career, source of funds for down payment and reserves, divorce, any new credit or any concerns with credit profile

6. both borrower AND property are being evaluated, so it’s just as important that the property meets minimum guidelines as well as the borrower– this can be especially tricky on condominiums since the complex must be approved as well!

For tidbits on how best to prepare for the mortgage process, consult with your favorite mortgage professional or stay tuned for future articles.