FHA Mortgage Expert - Tri-State Area - New Jersey/PA/Delaware

Very informative post. This could be very helpful to many a buyer. Thanks!

Well said. Homeless people can be pre-qualified. It means nothing. Lenders letters can be written in many ways that appear to say one thing but in reality they say nothing. The only document that carries any weight is the commitment letter which will outline any remaining conditions.

GREAT POST!  There are a lot of people who do not understand this.  It also seems the trend lately that agents are getting lazy and not getting the buyers through this step.  This is ALWAYS first on my list when you want me to give you the tour of homes.

Bruce....  thanks for stopping by and for the compliment.

John..... some good insight. thanks for the comments.

Jeffery.... thanks for the polite compliment. And I agree, hence the reason why I wrote this. After 14 years, you would be surprised at how many loan officers don't even know this. Thanks for your feedback.

Jeff, this can also change if during the home buying process the buyer switches from one home to another. Because now the new home has to go through a whole new process of it's own. I had a buyer with a contract on one home and was approved and they decided to break the contract and place a contract on a totally different home. Things had to be resubmitted to an underwriter and they did not get approved the second time...major mistake on their part.

Jeff it amazes me how many REALTORS do not know the difference.  Good job in educating them.

Thanks Jeff. 

Fran

If you ever move out here...let me know!  If you are this dedicated to blogging on A/R I bet you always respond to emails and answer your cell phone????

Danny..... yes and no....  first off, it depends if you are a broker or a banker. With many brokers, the credit might not be valid, because they might be selling it to another lender. The rates aren't usually good in most cases, if locked in on that particular property.

Yes, a new application needs to be taken, because you have a file on a particular property and a new appraisal needs to be done.  But there has to be a better reason why the client didn't qualify for the new property. Was the value higher?  Taxes higher?  I hate to say this, but maybe they didn't qualify to begin with and this was the loan officer's out, because they could make up any excuse now. I have seen this taken place before.

In any case... there has to be more mentioned before I could judge what happened. But thanks for your input. 

Thesa..... you think that's a problem, what about the loan officer's that don't know the difference?  In any case, thanks for your comments.

Fran.....  my pleasure and thanks for stopping by.

Sally.....   thanks, I really appreciate that. I would love to live out there, but probably not yearly. Why?  I need my seasons.....  but if I ever visit, I'll let you know. I would love to help handle your clients from here, but there is too much of a time difference. Just trying to get the confidence of some of them in Cali.  Again, thanks for the vote of confidence.

Oh yea... to answer your question, yes, I do respond to both and usually quickly. thanks..

I tell every client to ask go for the pre-approval for the reasons you mentioned.  It also makes the escrow process so much less stressful for buyers and sellers.  Not to mention us Realtors.  If our clients have less stress, we have less stress.

Jeff you are always on top of things. Love it. Glad that your apart of my group. Thanks bud

Ben

You are right on your point!

However, an other important ingredient is to know the mortgage person you are working with. Even with pre-qual letters I may have way less problems with some mtge lenders (direct or not) than I have with others that I did not know and still had a pre-approval. For example some well known on line lenders...don't know the market (local), escrow people, appraisers..etc.

Great post. The thing is in today's changing market, a pre-approval or loan commitment today may not be vaild 30 days from now as the secondary market continues to adjust.

Randy.... stress?  What would this job be like without stress?  ;o)  Seriously, it would be very nice if less stressful. Thanks for stopping by and for your feedback.

Benjamin.... thanks, I truly appreciate that. Wait for my next rabbit.  I do appreciate the comment..

Perrin.... thanks for the polite words. And as you mentioned about who to work with, I included a few links in regards to picking your lender. 

In regards to being an outside lender and not knowing the local market or knowing the appraisers, title people, etc etc. In my opinion, this is not always true.  There are some loan officers as myself, that build a very good network and surround ourselves with good people, even out of state. About 20% of my clients are from Florida and I have never missed a settlement date. I try to be all over and it can be done... and work for some. I know what you are saying. But this is one thing that I try to get consumers and realtors to think about and consider. The proof is in the pudding, but you need to take that step and try that person. Just my .02.

Thanks for your input. 

Michael....  this is so true, as the market adjusts. But a very good loan officer is going to have multiple back ups and or know where to turn if something goes array last minute. Sure, it won't always work, but it can be accomplished with the right mind frame. And thanks for the compliment.

Stress?  Do any of us go through any stress?  How come I had a stressful week?

 

Nice job Jeff.  I think the more we educate about this topic the better.  Too many buyers, REALTORS, and mortgage officers just don't seem to understand these letters and the other basic letters of our business I mention in (Buyers Be Wary - What do mortgage letters mean?). I especially appreciate your reiteration that a pre-approval/commitment letter can and usually does have some conditions to it.  It is an agreement to lend when these are met, not a loan guarantee.  I have told at least one or two people who didn't understand that that the only real guarantee to loan is the one signed at the time the checks cross the closing table.

Jeff...I didn't mean you but was rather referring to other on-line or over the TV lenders... their request gets to a appraiser that doesn't know them from a hot rock. because the appraiser will probably never see them again the clients he works for daily go to the top of the pile... as an example. And IF you do have trouble try finding someone that can really make thngs happen...

Sally.... where did this come from?  Stress?  Or are you carrying this over from your previous blog?  ;o)

Terry.... thanks for that compliment and I'll take a look at your link. 

Overall, thanks for your reinforced feedback and input. But the guarantee stuff... I am very good at for the most part, even prior to closing and funding, no matter how the market is. The only thing that would have been negative was the 100% loans with a 580 score. But my way out... these lenders still gave people 2 weeks to close on these types of deals. If you take a good application, that is usually the length of time that is needed to close on a deal anyhow. Just having your ducks in a row.

Perrin.... I wasn't saying that you were talking about me either. I was just generalizing on how I work. That I can work just as efficiently locally as I can 4 states away. As long as I have prepped myself with my so-called circle of networking relationships... aka realtors, appraisers, and title people. ...which I have done in several states. I take that part seriously. That's all that I was trying to explain.  Thanks for clarifying this though. 

many do not understand the diff

 

great post

 

also they dont understand the catch 22 when it comes to getting a commitment....they want a commitment from a lender before they sign a contract yest the lender wont look at a purchase wo the contract.

 

I try to explain that to people but it seems to go over their heads

 

DOMINICK GACCINO

Branch manager

First Suffolk Home Mortgage Corp

Jeff - I follow what you're saying about the guarantee, but I've found myself in the situation where we were all ready to go and the lender in making his final credit check discovered that the customer's score had dropped below program minimums.  He had paid off a couple of collections (I told him not to do anything but make regular payments - he thought he'd do these as well - to help) and had his score drop.  The loan didn't close and the REALTOR jumped all over about the commitment letter.  Our letter now has a clause regarding maintenance of credit and employment.  My manager had a customer who got fired from her job a few days before closing, and I had one who informed me three days before closing that she was going to file for divorce as soon as the loan was closed.  Neither of those loans got to the table, though both had commitment letters.  In the case of my soon to be divorced lady, the realtor (small letters earned and no longer in business) said it was no business of the lender's and the customer could always change her mind.  Perhaps my way of looking at these letters is a bit over-reactive; they do guarantee the lender's commitment under 99% of the circumstances.  They cannot guarantee the customers actions - the other 1%.

Jeff-I think you cheated.  I was just thinking about writing about the same topic.  So, my thoery is you stole it right from my mind.  JK.  It's just that great minds think alike. 

Hey, good topic!

I just had this conversation with a Realtor today.  I'm emailing this to her because I can't think of a more complete explanation.  I, too, prefer the Mortgage Loan Commitment Letter (and use it as a lock letter, also)

dominick....  thanks for stopping by and for the compliment & comments. But curious, in regards to your last statement. We will still give pre-approvals even without a contract. This is key and important....

Terry.....  you make some valid points. But I guess I need more info in regards to the example with the credit score issue. How long was it when credit was pulled and the commitment issued? And when was it going to close?

Ann.... cheated?   sorry....  ;o)   As I told someone else, this has happened to me a few times. I had a great idea one day and didn't get to it for a few days. Next thing I know, the exact topic that I was thinking about, was even featured.  Yes, great minds think a like... thanks for stopping by.

Brian.....   thanks for the compliment and I hope this helps your realtor.

And we need to educate the consumer on this, because so many think they are approved when they talk to a loan officer the first time. Or is it because so many lenders mislead the client... to get them in the door?

Jeff - The credit score issue I mention above worked this way.  The report I had in file was 20 days old at close, but the particular lender on this loan had a policy of using my report to underwrite but pulling his own credit a day or two prior to closing to ensure there were no surprises.  In this case my report was pulled in week three of a month and there's in week two of the following month.  In that time, his payments had hit the scoring algorithms. By paying them, the collections (even as paid) became fresh and dropped the score.  In this case the investor guideline allowed no exception for this credit issue.  Because the loan was small, and the score dropped below that needed for the LTV he needed to purchase,  there were no other lenders in my portfolio I could take it to.

Great Explanation Big Jeff i like how you pasted the actual commitment letter. Most lenders do not apply that.

Eddy

Jeff, Thank you.  This is very helpful and timely as I had asked the buyer's agent for a pre-approval letter and received a pre-qualification letter.  When I called the buyer's agent to obtain the pre-approval letter, she told me the loan officer just "wasn't good with words" and meant pre-approval letter.  I asked for permission to call the mortgage officer, so I can find out for myself what information was verified and what kind of loan the client is approved for. 

 

TERRY......  how low was the credit score?  What percentage were they putting down?  That is why I couldn't be a broker.... I want full control and a company that understands that credit doesn't need to be pulled again, in the middle of the process. Credit is good for 90 days and 120 for new construction.

EDDY....  thanks...  so for the delay in responding... hope all is well.

GAIL......  my pleasure.... so many people get the two confused and many lenders let their clients believe that they have been pre-approved, when they have hardly been pre-qualified....   I always introduce myself to both agents, telling everyone that anyone can call me. I have nothing to hide.

 

Hi Jeff,

I had to look back in my records on this one as my last response on it was a while ago.  According to my notes, the score I pulled was good for the loan by 6 points (596), the payoofs he did dropped him by 23 points (three collections  paid to two agencies).  He was coming to the table with 10% down on a subprime loan.

 

TERRY.....  just curious, did you even look at FHA at that moment?  Were you approved FHA at that time?  10% down and those credit scores?  if they had decent credit for the last 12 months, not perfect...  it sounds like it would have closed with a FHA loan.  Sure, I would need to know more, but not much more..

 

Jeff,

The broker I was with at that time was not approved for FHA.  A sad thing about that; had she been FHA approved she would probably not have gone out of business.  In the end it was she and I trying to hold it together long enough to finish out the deals in pipeline or at least place them with other reputable brokers.  She's still looking for a new career stating she won't work in mortgages again.  Sadly she was very good with clients and very reputable.

 

TERRY......  kind of what I figured, because it sounded like a FHA deal, especially with 10% down and those scores.  And yes, if FHA approved, she stil might be in business.

 

I don't pre qual anyone without actulally getting all their info together and submitting that along w downloading credit into Desktop UW (DU)

 

if i get an approval from that then I would send them a pre qual letter...................pointless wasting anyones time unless you know you can get the job done

 

DOMINICK GACCINO

As a lender I am always amazed at the number of folks that think there approved simply by calling a loan officer and telling them there income and payables.

 

DOMINICK...... well, I rarely ever do that Dominick.  And most of my loans are FHA loans and 98% of them I know would be refer/eligibles.  It's because I know what I am looking at and I know what my undwerwriters would except.  

So, you are telling me that if you don't get an approval, then the loan is not qualified and possibly dead? Just curious....  in my 16 year career, I have only had 2 loans denied and one was actually after putting a loan in DU. The convnetional guidelines on my community changed a week later....  once they found a house, we re-ran it and it was not approved. You can always hang your hat on an approval from the system, not on conventional loans in the market.  Just my opinion.

 

RICHARD......  yes, I am amazed also... but you know what, I blame a lot of this on the loan officer though, for not explaining this in detail. I give my clients a pre-qual letter once I qualify them.  Many loan officers don't do this until the realtor asks for it.... so, put yourself in the consumers shoes. Would you know the difference?

 

I have always had trouble remembering and understanding the difference between the two.