Do Pre-Approval Letters Really Mean Anything?

Do Pre-Approval Letters Really Mean Anything?

Minneapolis, MN: When buying a home, everyone will tell you that you need a Pre-Approval Letter, and pretty much no sellers will look at your offer without a Pre-Approval Letter being attached to your offer. But do Pre-Approval letters really mean anything?

The correct answer is yes, no and maybe.

The intent of a pre-approval letter is incredibly valid in the home buying process. It is designed to inform a potential home buyer that their odd’s of final loan approval is strong. For sellers and Real Estate Agents, it tells them the buyer has met with a Loan Officer, who has reviewed their application and documentation, and everything looks good for final approval once they select an actual home.

iMortgageJoe.com Certified Pre-Approval Letter

Pre-Approval is very different from basic Pre-Qualification

Pre-Qualification is always the initial step in the home loan process. The client provides and application, and the lender generally pulls a credit report for review. The client provides an overview of they situation, including jobs, income, assets, and debt. Usually just verbally.

Other than maybe a credit report, little, if any actual supporting documentation is obtained. It is more of a sounds like you should be fine type conversation on certain assumptions.

This is generally adequate for early kicking around the idea of buying a home, and can be done rather quickly on the phone.

Standard Loan Pre-Approval

The more typical standard mortgage loan Pre-Approval starts with the steps of Pre-Qualification, but the Loan Officer also collects and actually reviews your standard supporting documents, like pay stubs, W2’s, bank statements, and tax returns. The Loan Officer will also usually submit the application information through an automated underwriting computer system (AUS) to get a computerized initial loan approval.

This is a huge step above a Pre-Qualification, but is almost always limited to just the Loan Officer’s review. In-experienced Loan Officers, and not reviewing all documents may result in being told your are Pre-Approved, but the application may actually be denied.  It is extremely important to have an experienced Loan Officer who has seen just about everything on your side to eliminate future issues.

This is the most common form of Pre-Approval, and fits well for the vast majority of clients. It can generally be done in a day or two with most lenders.

Full Underwriter Pre-Approval

Full Underwriter mortgage Pre-Approval is when your application and all supporting documentation are reviewed and approved by an Underwriter.  This includes reviewing all your documents, and completing all the job verification, tax return verification, and fraud check that lenders do as part of the approval process that are not done with a standard Pre-Approval.

This is also sometimes known as a full credit approval. It is still not a guarantee of closing, as the lender will need to get an appraisal and review a title company commitment of clean title once you have a successful offer on a home before, but all credit related issues have been cleared.

As this is a full credit approval, this generally can take two weeks or more to complete.

Underwriter Pre-Approval Carries More Weight

Mortgages Unlimited offers both your standard Pre-Approval, and a Full Underwriter Pre-Approval, depending on the clients needs. We call it our process of Underwriter approval a Certified Pre-Approval.

Certified Pre-Approval, Underwriter Pre-Approval

Underwriter Pre-Approval holds more weight, and is more attractive to sellers, especially when looking at multiple offers. Home sellers like it better knowing that more pieces of the approval puzzle have already been reviewed and signed off on by an actual underwriter. It puts your offer on top of any standard Pre-Approval, and especially any basic Pre-Qualification.

This is why we at The Joe Metzler Team at Mortgages Unlimited offer both options. The speed of a basic Pre-Approval Letter, and the Confidence of an Undewrwriter reviewed Certificed  Pre-Approval Letter.

We lend in MN, WI, and SD. To apply directly with me, and find out what type of Pre-Approval is right for you, just go to iMortgageJoe.com, my personal web site, or call me at (651) 552-3681.


Get Pre-Approved Before You Start Looking

Get Pre-Approved Before You Start Looking for a home

Minneapolis, MN: People often make the mistake of starting a home search without knowing what they actually qualify for. Falling in love with a $400,000 home and finding out you qualify for $200,000 can be heartbreaking. Thinking a loan approval will be easy, only to find out you have issues, or don’t qualify for a program you think you do, is another concern.

Virtually no Realtor will show homes to clients who have not been pre-approved, and virtually no seller will accept any offer without a pre-approval letter for this very reason. Being pre-approved gives both you and the seller comfort that final approval for your loan should be fine.

Pre-approval gives you, your agent, and the sellers confidence in knowing can get a loan, and that you are shopping in the correct price range for your income and payment comfort level.

We recommend getting lender pre-approved about 100 days before you would like to move. For example 100 days before the end of your apartment lease. This give you plenty of time to correct any minor issues that may cause loan approval issues, and plenty of time to find a home without just settling because of time concerns.

Finally, understand there are two levels of pre-approval. The more common one is what is known as Loan Officer pre-approval. This is where only your Loan Officer has reviewed your application information, documents, and credit. Generally this is acceptable in the vast majority of cases, but can be problematic when new or inexperienced Loan Officers make mistakes in their assessment.

Certified Underwriter Pre-Approved from Mortgages Unlimited, Inc
Certified Underwriter Pre-Approved from Mortgages Unlimited, Inc

Mortgages Unlimited goes a step beyond, and also offers full Underwriter Pre-approvals, known as our Certified Pre-Approval. This means your application has been completely reviewed by an actual Underwriter, who has given their blessing on your credit, incomes, etc.  This only leaves us to have to finalize your application on the exact home when you find it (purchase agreement, appraisal, and title review).

Certified Pre-Approval  is significantly better than a basic pre-approval, and gives you a distinct upper hand when negotiating on your dream home – especially if you are in a multiple offer situation.

To become pre-approved for a home loan on properties in Minnesota, Wisconsin, or South Dakota, please fill out our secure online application, or call (651) 552-3681 to apply over the phone, or to schedule an in-office appointment.

Get pre-Approved for your home mortgage loan in Minnesota, Wisconsin, South Dakota
No Obligation to apply, and see what YOU qualify for.

 


The DANGER of automated mortgage pre-approvals via your cell phone

The danger of automated mortgage pre-approvals via your cell phone

Minneapolis / St Paul, MN: Can you really get a mortgage pre-approval online in 10 minutes? Yes. Should you? Probably not. It’s 2018 as I write this, advancements to our lives, along with instant gratification is everywhere. Why go to the store when you get better selection and two day shipping from Amazon. No need for old fashion video stores, everything is on Netflix, Amazon Prime video, or your HBO Go app.  Twitter, Facebook, the internet, and of course Smartphones and iPads have replaced home computers for many people.

So it is no surprise that many mortgage lenders are now advertising instant 10-minute mortgage loan pre-approvals while you stand in front of the house you just looked at. The biggest company pushing these is Quicken Loans ® “Rocket Mortgage”®.

Sounds cool, and their commercials are really funny… But wait a minute… This is the largest financial transaction of your adult life. Can it really be done on your cell phone?

 The Traditional Mortgage Loan Process

The traditional process is you complete a loan application. You do that in person, over the phone, or by completing an online loan application. From there, a real live person reviews the information, pulls your credit report, talks to you about your situation, uses knowledge and expertise to explore all avenues, issues, and different loan options (all good ideas).

Assuming that all looks fine, your application is processed through one of the major AUS (automated underwriting system) of Fannie Mae, Freddie Mac, FHA, etc, to get your initial “looks good” answer.

ffThis automated underwriting system process only takes a few seconds, and with the initial “looks good” answer to your loan application, you got a loan, right? NO, not even close.  This is just AN INITIAL step.

Next, just because the AUS indicates ACCEPT (yes), there are still pages of information and requested items that need to be received and reviewed for accuracy BY ALL LENDERS. Common items are W2’s, pay stubs, bank statements, tax returns. Depending on your situation, you may need further items, like bankruptcy papers, divorce decrees, and more.

You generally need to gather all those documents and submit them to your lender for review to receive a proper Pre-Approval.

PRE-APPROVAL IS NOT A LOAN GUARANTEE

After you find the exact house and sign a purchase agreement, the lender orders the appraisal, title review, and everything else is sent to the underwriter for final review. Generally speaking, a proper professional pre-approval will equal a successful final approval by underwriting in the final stage of the process. A sloppy pre-approval, not properly review??? Scary stuff.

Your largest financial transaction of your life is too important to trust to just anyone, let alone a computer. You need the wisdom and input from a licensed, experienced, and professional Loan Officer.

The Quicken Rocket Mortgage ® 

The difference with their app, is that after taking the initial application information online (like thousands of other lenders), their app jumps right to running your information through the major automated underwriting system to get that initial pre-approval. Yes, that can take just 10 minutes.

Next, they attempt to gather some of your basic supporting documents electronically. Rocket Mortgage ® will ask you to link your financial accounts to their program. This allows them to check your financial statements online without you having to send them the physical copies of your banking information. Again, sounds cool, but in the day of cyber hacking, do you really want to give them access to your information electronically?

Next, a huge portion of applicants are not able to take advantage of instant document verification, and still need to submit many, if not all of their documents the traditional way – completely eliminating the cool factor.

You can also get instant rate quotes, cost quotes, and options like to buy discount points. Again, sound nifty, but…

The first major issue is simple. Garbage in equals garbage out.

I review a LOT of online mortgage applications.  Rare is it that I don’t need to change or adjust any application data before running it though the computers. Data errors, missing data, and income that isn’t allowed to be used for qualifying are all too common.

For example, I recently had a client input $50,000 a year for his wife at a job she has been at for about 9 months. But, as I interviewed him, I discovered that her new job is 100% commission based. Standard underwriting rules for commission based income require the person to have two-years on the job, and that we average the two-years of income.  Therefore her job qualifying income was ZERO.  Oops… Now you are running around with a quick pre-approval looking at houses you will never actually get final approval to buy.

Another recent applicant answer the “Do you pay alimony or child support” question online NO. But when I physically reviewed his pay stub, it clearly showed the deduction for child support. This additional debt lowered the maximum house he could buy $50,000. Again, potentially someone running around with an invalid pre-approval letter.

 The Big Disadvantage of Instant Online Approvals

For as cool as all this sounds, it has huge disadvantages.

First is not having the opportunity to talk to a human loan officer. Consumers may lose out by applying for a mortgage that isn’t necessarily the best choice for their situation. I get clients all the time who complete my online application for one loan type, but I end up switching them to something better suited for their situation. This is because most applicants usually have several mortgage options available to them. Since most consumers are not mortgage experts, this is clearly an area where a human loan officer could help steer their client in the right direction.

Your largest financial transaction of your life is too important to trust to just anyone, let alone a computer. You need the wisdom and input from a licensed, experienced, and professional Loan Officer.

They typically don’t offer first time home buyer programs, and don’t offer down payment assistance programs. This is especially troublesome, as younger first time home buyers are the ones more inclined to think apply on your phone is cool.

Do they have the best interest rates and lowest closing costs?  Generally not, and sometimes, especially on government loans, like FHA, we beat their rates by a long shot.

The Best Move When Getting Mortgage Pre-Approved?

When buying a home, your best move is to always work with a local lender the traditional way. The guy located in your geographic area, with a local reputation to protect. There is nothing anyone on the internet on the other side of the country can offer that you can’t get down the street.  More often than not, it is just the opposite… Especially when it comes to down payment assistance programs for first time buyers. These programs are always only available from the local lender.

We lend for homes in MN, WI, and SD and would love to assist you

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Consumers disqualify themselves for home loans

Consumers Misjudge Max Debt-to-Income ratios… and Disqualify Themselves from home loans

According to a survey by Fannie Mae’s Economic and Strategic Research Group, many consumers think it’s difficult to get a mortgage in today’s market.images98735

And forty five percent of those respondents cite too much existing debt as a top reason. Yet, in that same group, more than half don’t actually know the maximum debt-to-income ratio (DTI) required by lenders.

The result — potential buyers may be wrongly disqualifying themselves before they even apply for a mortgage.

That’s why it’s key to provide information, resources, and tools to educate consumers on the mortgage process, and any perceived barriers, including Debt-to-Income guidelines.

This is also why it is key for the consumer to work with a fully licensed and experienced Loan Officer, versus the more common unlicensed mortgage loan application clerk, who can help you determine the best home loan program, and explain the various program rules and guidelines. On a regular basis, I come across clients who think they can’t be approved for a home loan, yet they can. On the other hand, I also run across plenty of people who have no chance of getting a home loan today, yet they apply.

The bottom line is that it never hurts to apply. You may be given a pre-approval for your dream home, and if not, you’ll be given details on how to improve your situation to be able to qualify later.

Learn more about how to choose a mortgage loan officer here.

Download more insight on DTI and learn about the overall study here.


Get pre-approved, not just pre-qualified

Everyone knows it is smart to get lender Pre-Approved before starting to look for a home, yet many people are actively looking at homes thinking they are Pre-Approved, when in reality, they are only Pre-Qualified.

Pre-Approved or Pre-Qualified? So what is the difference?

welcome2_FTHB_1As a Loan Officer for over 20-years, I can tell you story after story of people who thought they were Pre-Approved, signed a purchase agreement, gave notice on their apartment, only to be told a week before closing that they were denied.  The vast majority of these people, calling me to see if I can magically help them had two big items in common:

  1. They applied at a bank or credit union
  2. They NEVER supplied the lender with all (or even any) basic supporting documents up front.

Simply put, if you didn’t supply current pay stubs, bank statements, W2’s, and Tax returns, YOU ARE NOT PRE-APPROVED – No matter what they tell you!

Looking to buy a home in Minnesota, Wisconsin, or South Dakota? Don’t have your dream fall apart at the last minute, get properly Pre-Approved for a home loan today.

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Twin Cities real estate market hits 10-yr high

Minneapolis, MN: The Minneapolis, St Paul area real estate market reached a 10-year milestones in June 2015, with signed purchase agreements rising 19.2 percent to 6,266. Last year, closed sales had increased 22% to 6,928.

Real Estate, Minnesota, Minneapolis, for sale, mortgage rates, interest rates
Get Pre-Approved Today – Click HERE to Apply Online

This is all welcome news, because the last time demand was this strong was back in June 2005, according to a release Monday from the Minneapolis Area Association of Realtors.

The June 2015 median sales price climbed 4.7% to $229,900. This puts the AVERAGE home price to within just 3.5% of the record high set back in June 2006, which was at a then record median high of $238,000. Typical price per square foot, now at $128, is about 18.5 percent below its June 2006 record high.

The local real estate market continues to be a sellers market, because of the ongoing imbalance between the supply of homes for sale, and the number of active buyers looking to buy a home.

Sellers are getting on average about 99.6% of their last list price, with large numbers of homes selling within days, with multiple offers, and over list price.

For buyers, this means you need to be fully mortgage lender pre-approved, with pre-approval letter in hand, and ready to make an offer immediately on anything you love.

 MN first time home buyer programs


The importance of Mortgage Lender Pre-Approval

The Importance Of Full Lender Pre-Approval 

Initial mortgage loan pre-qualification and full lender pre-approval are two of the most important steps you can take towards owning a new home. In most areas, Real Estate Agents either won’t even show you homes, or for sure, will not let you make an offer on a home without a full lender pre-approval.

Basic Pre-Qualification

house_from_wordPre-qualification is the first step to securing a home loan. Essentially, it is an initial “how do you look”, and “feels good” start.  Pre-qualification is quick and involves answering only a few questions about your income, existing debt and accumulated savings. It is also important that we discuss your long-term financial objectives. With so many loan options available, we want to select the one that meets your goals. With this information and your consent, lenders can access your credit report and begin to determine which loans you may qualify for, how much house you can afford, what the payments might look like, and how much money you will need to make it all come together.

Full Pre-Approval

Full pre-approval is the next step up up from basic pre-qualification. In this step, the lender verifies your basic supporting documentation, like pay stubs, W2s, tax returns, and bank statements. Upon review, the mortgage lender will provide a written Pre-Approval Letter. While never a loan guarantee, this is written documentation showing that a lender have taken an application, reviewed your documents, and believes once you find the exact dream house, you will make it all the way through the underwriting process.

If you’ve never given any documents to your lender, you are NOT pre-approved.

With a pre-approval in hand, you can shop almost as a cash buyer! This gives you strong negotiating power because the seller will take your offer more seriously. A lender’s pre-approval will often convince the sellers to accept a lower offer for the home because they know the financing is in place and the deal is safe.

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Joe Metzler is a Senior Mortgage Loan Officer for Minnesota based Mortgages Unlimited. He was named the 2014 Minnesota Loan Officer of the Year, and was ranked #98 of the Top 100 Loan Officers in the Nation by Origination News. He provides Home Mortgage Loans in MN, WI, and SD. He can be reached at (651) 552-3681



Why Mortgage Pre-Approval is Important

Successful house hunting starts with mortgage pre-approval – Not talking to a Real Estate Agent.

What Is Mortgage Pre-Approval

Minneapolis, MN:  Mortgage pre-approval is what happens when you talk to a Loan Officer and find out how much house you can afford. It’s an important step because it helps your real estate agent zero in like a laser beam on the correct house price for you. Your mortgage consultant will ask questions about your financial situation, including job, income, assets, debts, and more. Then you’ll talk to them about your comfort level when it comes to a monthly mortgage payment. It’s important to know this, in order to avoid buying a home you really can’t afford.

 

FHA Mortgage Loan Expert in MN and WI
FHA Mortgage Loan Expert in MN and WI

At this point, you are NOT pre-approved.  The next step to full pre-approval is submitting all your documents to the lender. Common items include; photo ID, pay stubs, W2’s, and bank statements. Once the mortgage company reviews these documents, THEN you will be pre-approved!

Here’s a look at some of the benefits to getting pre-approved before you house hunt:

  • Powerful Buyer. Sellers often give preferential treatment to pre-approved buyers since they know for sure that you can finance the purchase. If you get into a bidding war with another buyer, the seller might look at your offer in a better light than someone who hasn’t talked to a mortgage consultant.
  • Interest Rates. As interest rates go up and down, you can get in on a locked rate before they go up again. You can lock in an interest rate if you are pre-approved, as soon as you have a signed purchase contract. A lower interest rate will save a lot of money over the life of that mortgage.
  • Credit Surprises. Mortgage pre-approval reduces credit surprises.  If you wait until the last minute to secure financing and find that you have a few issues that need to be resolved with your credit, you could miss an opportunity to purchase your dream home.  Getting pre-approved will help you head-off surprises so you can go look for the perfect home.

Mortgage pre-approval is as close as anyone can get to insuring you’ll be able to obtain a mortgage loan in advance of finding a home.  Pre-approval gives MN and WI first time home buyers a definite idea of what they can afford and shows sellers that they are dealing with a serious buyer.


8 things that will screw up your mortgage closing

Minneapolis, MN:  In the home mortgage approval process, things are not what they used to be.  Underwriting now goes over your entire life with a fine tooth comb.  It really isn’t something to be scared of, if you deserve a loan, you will still get one.

FHA Mortgage Loan Expert in MN and WI
FHA Mortgage Loan Expert in MN and WI

But, there are several places buyers often do things that can turn an approval into a denial. In the excitement of purchasing their new home, they may prematurely make financial moves that impact their mortgage loan approval. Lenders now run a final credit check within a few days of closing, and if it is different from the original credit report, it may be a deal breaker.

Here is a list of 8 things that will screw up your mortgage closing.

1.      Don’t change employment status.  Seems simple, but I’ve had many people over the years quit their job, be laid off, or even terminated

2.      Don’t make any major purchases:  Furniture for the new house sounds great, but can blow your debt-to-income ratio right out of the water.  So can new cars.

3.      Don’t increase credit card debt or miss any payments.

4.      Don’t change bank accounts or make undisclosed large deposits. Any large non-payroll deposit on your last two months bank statements need to be explained and proved.

5.      Don’t apply for a credit card, co-sign on a loan or make a credit inquiry.  Any changes to the original credit report need to be explained and documented.

6.      Don’t spend money set aside for closing, not any, not ever.  Again, seems like common sense, but I once had a client spend their down payment money on a moving truck.

7.     Any delay in providing all paperwork asked for by the mortgage company can and does cause huge problems. When the Loan Officer asks for something, don’t argue or question why they want it, just drop everything and get it to them ASAP.

8.      If you change anything…  anything, let the lender know. You’d be surprised how many times deals get to the closing table and this is the first time the lender finds out the purchase price changed.

Buyers must be sure there is nothing happening personally or financially that might put the closing at risk.  It is too common for buyers, being approved for a mortgage loan, to think that relatively smaller financial issues won’t matter.

The bottom line is tell your Loan Officer everything, and we’ll make sure you have a smooth, stress free, no surprises closing.


Are you a Serious Buyer or a Time Waster?

Serious Home Buyer?

Minneapolis, MN:  As a professional licensed Loan Officer, I encounter people everyday that say they want to purchase a home.  But when it comes down to it, they may not be ready for that responsibility of a home,  or they are can not get pre-approved for a home loan.

In our society, it seems everyone wants everything now.  Learning that it may take a little time and some effort on the buyers part frustrates many of them them.  Being told “no” simply doesn’t register.  It amazes me the number of people who apply with me, and when I look at their credit report, I see that they’ve applied with 9 other lenders.  Face it, it you’ve been told no 9 times, the 10th time is going to be a no too. Stop wasting my time.

When I deny applicants, we always tell them,  “you don’t qualify right now, but if you do these certain steps you will be able to purchase a home in the future.”

These people are not serious buyers, and just waste the precious time of Real Estate Agents and Mortgage Loan Officers though out all of Minnesota, Wisconsin, and the rest of the country.

Don’t take your frustration out on the messenger.  We want to approve you, but if you are not ready today – you are not ready. We will let you know that you need to alter to get an approval in the future.  Maybe pay off some debt, improve your credit score, or come up with more down payment money.  Sometimes this may mean you don’t get the latest iPhone,  or you keep your older car while you pay down your debt.

Maybe you have had some trouble paying your bills on time in the past and have poor credit.  I’m amazed at those who want, but don’t even come close to proving to a mortgage company that you are ready.  In today’s world, easy options, and loans for everyone don’t exist. You have to prove to lenders you are ready.  This means on time payments,  a good credit scores, prove your income, and have some skin in the game (down payment).