This just too good not to reblog. I wrote a past (maybe earlier this year) ask AR MLO to answer the question: If the buyers have some credit issues to attend to, then how are they considered qualified? Sadly enough, I didn't get a good response.
I have a lender addendum that requires the buyer and seller to certify that:
Credit has been pulled
Rental History verified (if applicable)
And as Lenn stated:verification of funds to close.
Approval is not contingent upon buyer clearing up any credit issues
Ihad one lender tell me that they couldn't sign it because of privacy issues. You mean to tell me that if the buyer reads it, signs it and then sends it to lender for signature........you can't sign it. The mere fact that the buyer signed it and sent it too the lender would be proof enough that the buyer gave permission to share this info.
Without verification of funds, employment, creditworthiness......a pre-approval letter really isn't worth squat.
A BUYER CAN SELECT ANY LENDER THEY WANT. . . That doesn't mean the seller must accept your offer.
An enlightening article this morning by Sally and David Hanson inspired this post. See: Buyers Choose Their Lenders....Don't They ?
Over many years of real estate practice, a few things have become clear to me. One of them is that, in matters of presenting offers to buy, the experience of the buyer's and seller's agent can determine whether or not a sale is likely to reach the settlement table.
THE LENDER'S LETTER. Local practice in Maryland and Northern Virginia requires that a pre-approval letter by a mortgage company/bank, etc. accompany all offers to buy. However, there are letters and there are letters. We've seen many comments in ActiveRain articles to the effect that "Lenders' letters aren't worth the paper they're written on". Sadly, that is often true.
Three things I look for in a lender's letter are:
credit report review,
verification of employment and
verification of money to close.
Those things are fundamental and if the letter doesn't specifically state these, it isn't worth the paper it's written on. Other matters of importance are,
Is the letter on company letter head? You'd be surprised a the number that are NOT.
Is the letter signed? If it isn't signed, whom do you speak with??
Does the letter have an approval deadline? If the letter doesn't, it may expire before the date to close.
Is the loan officers' phone contact on the letter? No phone number, no one to speak with.
Is the buyer qualified?? Do the numbers work??
EXAMPLES: (these are all based on personal experience)
DO THE BUYERS QUALIFY?? Listing agents with experience often require a Buyer's Financial Statement accompany any written offers. I surely do. I have reviewed many offers with a financial statement that clearly showed that the buyer was no where near qualified to obtain financing described in the offer or the lender's letter. That would be one of those lender's letters that isn't worth the paper it's written on. When contacting the loan officer for clarification, they will admit that they provided the letter without verifying any buyer information, often as a favor to the buyer's agent. Sad but true. It's also clear in these cases that the buyer's agent was not able to qualify that buyer.
CLOSE BUT NOT QUITE THERE. Buyers who have marginal credit scores with a short closing date in the contract. If the loan officer says that the buyer's credit score is "just a little bit low, but they can get it up by paying off some debt". Fine with me, but WHEN???? My experience is that, if a buyer's loan pre-approval is conditioned on paying off debt, that would mean that the cycle of (1) paying the debt, (2) noticing the credit bureau, (3) receiving a new credit report with the higher credit scores needed to qualify for the loan is no less than 60 days and usually more. If you have an offer with a 30-46 or even 60 day close, be prepared for a delay. If the buyer needs those higher credit scores to qualify for an interest rate, this scenario is a little to close for comfort and I'd be looking for a back-up contract.
SO YOU HAVE A LENDER'S LETTER. That doesn't mean the agents' job is done. Buyer and Seller agents have a duty to their buyer or seller client to know what is in that lender's letter and what it means to the buyer's ability to get to the settlement table.
Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988. Serving home buyers in MD and Northern VA.
Making sure the lenders letter does the job.
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