Pre Qualified Mortgage

Here’s the result of getting a Pre Qualified Mortgage

Shopping for a home without a pre qualified mortgage is very risky.  You put your money and your sanity on the line. Please get a Pre Qualified Mortgage letter.  Let me explain why:  Let’s say that you want to buy a home.  It only feels natural to start looking in order to get an idea of what is out there and what would fit your needs and goals.  So, you start looking online, driving through neighborhoods and maybe looking at some open houses.  You put off getting a pre qualified mortgage until you find something and after looking for a few weeks, you realize that the perfect home has come up for sale and you want to make an offer.  You decide that representing yourself is a bad idea, so you find an agent to work with or call the listing agent to negotiate.  (There are pitfalls within this scenario but let’s assume that in this case, everyone is honest and ethical.)  In talking with the agent/agents you come to an agreed upon price, set your deadlines and deposit your earnest money.  You are under contract!

Now it is your turn to act!  Your earnest money is at risk.  You must perform your duties as a buyer or you lose your earnest money.  Usually, if you are going to have an inspection done, you have 7-10 days to do so.  Inspections range from $300-$500 depending on the size of the home.  If your inspector finds that there is something terribly wrong with the home and you no longer want to buy it, you can rescind your offer and get your money back as long as you do so within the deadlines.  You would lose the money you paid for the inspection however.

Let’s say the inspection goes well and you decide to continue with the purchase.  While you were spending time with your inspection and due diligence, the deadline on your financing and appraisal is fast approaching.  The finance and appraisal deadline is usually 2-3 weeks from the original date.  If your inspection took one week, you now only have 1-2 weeks to get your appraisal and get fully approved for a loan.  Now you are under pressure to get your documentation to your trusted loan officer so he or she can get you approved.  So, you spend a day or two calling your CPA for tax returns, contacting your bank to get statements showing you have enough money for the down payment and gathering other required documents.  You take time off work to drive the forms to your loan officer because your 10 year old fax machine keeps jamming and you realize that you forgot one of your pay stubs (or any other small detail.)  Now the day or two has turned into 3 or 4 days and your loan is still not submitted because your file is still missing necessary documents.  If you had a pre qualified mortgage, this would already be finished and you could sit and dream about fresh paint, new furniture, birds singing, kids laughing and meeting new neighbors.  However, you don’t have a pre qualified mortgage so please read on.

Now, the pressure is REALLY on.  You finally get everything in and the underwriter needs 24-48 hours for the INITIAL decision to be issued.  It’s a little known fact that your file will actually go through underwriting TWICE.  The initial approval will ask for additional documentation that may or may not come from you.  The appraisal may need corrections, the title may need additional explanation or information and worse; there may be an issue that can take days to correct.  A pre qualified mortgage would have really made sense now.

Once all of these corrections have been made and conditions gathered and resubmitted to your loan officer, you realize that your finance and appraisal deadline is today at 5:00!!!!!

CRISIS MODE:  You and your lender call your agent to arrange an extension on the finance deadline.  The selling parties agree to extend as long as you render your earnest money non-refundable, have your lender issue a pre qualified mortgage letter and submit additional money to keep the deal intact.  You swallow hard and agree to the terms.  Now,   your initial earnest money is at risk, you’ve spent $300-$500 for an inspection and you are obligated to pay $300-$500 additional money for the appraisal.  Do you think you will sleep well tonight with all of this happening?  Chances are that you are worried sick.  Getting upset with your loan officer won’t help either.  It will only make a tense situation worse.  Now, you wait with clenched hands.  Your palms are sweaty, your hands are shaking and the minutes and hours feel like an eternity.  At the end of the day you are exhausted and anxious to hear from your lender.  The phone rings and with crossed fingers and toes, you answer.

This story has 3 possible endings.

One:  Great News!  You are fully approved and docs will be ready for you to sign in two days.  You think, “Wow!  what a stressful few weeks.  I’m never going to buy a house again.”  You close and move in and nothing was lost except for the toll that the unnecessary stress had on your life expectancy.

TWO:  Great News!  You are fully approved, but docs won’t be ready for you to sign until next week because at the last minute, the RC Willey account you opened last week popped onto your credit report and the account will need to be documented through additional means and included in your debt to income ratios to make certain you still qualify for the loan.  Oh, and the underwriter will need to sign off before documents can be ordered.  You think:  “#&&$&&#&#&*@#&!  I will never, ever EVER buy a house again!  What a terrible experience!”  Then you get into a fetal position and say to yourself over and over, “Please close, please close, please please please……..”  A week later you close.  The toll on your physical being is felt for months and you are visibly stressed.  When your friends see you to congratulate you on your new home, they enthusiastically say, “Congratulatio………..whats wrong?”  Not what you were hoping for.

Three:

Phone rings after 24 torturous hours.  It’s your loan officer.

You:  HELLO??????!!!!!!

Loan Officer:  {deep breath}…hi Gene…..

You:  Are we approved?!!!!

LO:  I am so sorry…no.

You:  {blood pressure rising….}  WHA!! WHA…WHY?  Why not?

LO:  I’m so sorry, but it appears that you have had a drop in your credit score due to something that we could have addressed earlier in the process….. by doing a pre qualified mortgage.  We can fix it but…….

You:  BUT WHAT!?

LO:  I spoke to your agent and the seller has a back up offer that they want to move forward with.  The other offer came with a pre qalified mortgage letter from a really good loan officer.  They can probably close sooner than it would take us to fix this problem that would have been solved had we looked into this sooner.  I am so sorry.

You:  So I lost my earnest money?

LO:  You will have to contact your agent about the earnest money.  I will be charging your credit card for the appraisal that was done.  Good luck getting your earnest money back.  If you would like to keep looking for a different house, I’ll get this problem fixed and get you a pre qualified mortgage letter.  Will that work?

You:  I can’t believe this has happened.

LO:  It is very difficult to close a home loan on time unless you get a majority of the work done early in the process.  Getting a pre qualified mortgage is the only way to accomplish what needs to be done so you don’t put yourself at risk.  There are almost always unpredictable things that take place during the process.  Your loan and credit should not be unpredictable.  It is fully within your control to go through this simple process first and have a smooth closing rather than risk your hard earned money and stress yourself into a quivering wretch.  By the way, as your lender, I experienced some undue pressure as well.  I’m glad it’s Friday because I need a couple of days to smooth out life at home and get my nerves back to normal.  I’ll call you Monday.  Have a nice weekend.

Conclusion:

This happens way to often.  People are going about this backwards.  If you think you want to buy a home, please consult a great loan officer before you make any offers.  This scenario would have ended brilliantly if the little things were taken care of first.  By the way, there are ALWAYS little things.  Please call me so we can find and eliminate any problems and have a great experience and a smooth closing.

Thanks!!  🙂