Lisa, Home Buyer in California

If a buyer is pre-qualified, why should the process be repeated with the listing agent"s lender?

Asked by Lisa, California Sun Jan 4, 2009

"Before writing an offer buyer must qualify with ___". I want to put an offer on a home. I am qualiied with a major bank. Must my information be shared with another lender? Is this legal? Previously there was a Fannie Mae home that I wanted to put an offer on. The company was Express Pathway that is used for their prequals. They were so rude. Even the listing agent had problems with other clients complaining.

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What I recommend Is that your lender gives them the information needed...credit report, income & asset information, loan application but exclude or cross out all account numbers, social security #'s, your address and do not give the other lender the authorization to do anything.

That will provide all the necessary proof for qualifying If that isn't acceptable, which it definitley should be then something underhanded is trying to be done to steer you.
1 vote Thank Flag Link Sun Jan 4, 2009
A pre-qualify letter usually just means the buyer has an income. It is not much of a process since no debt to income ratio, or credit score has been shown to the Lender. It is always good to establish a relationship (pre-qual letter) with a backup Lender.
0 votes Thank Flag Link Sun Jan 4, 2009
The answer to this depends on whether this is a regular sale or a bank-owned (REO) property.

If it's a regular sale, then the listing agent is wanting all buyers to be verified with his/her lender of choice to make sure that the prequalification from the buyer's lender is valid. There are some lenders who will issue prequalification letters without properly reviewing the buyer's information, so unfortunately others must pay the price for this.

If it's an REO, the bank will typically require you to prequalify with one of its affiliates in order to ensure that you're qualified to close the transaction. They could do this by alternate means, where you submit your information to the bank's asset manager and then they run your information through their system, but it's much more efficient on their end if you take care of this yourself with one of their affiliates.

Either way, you shouldn't have to complete a new loan application. Your lender of choice should be able to share the required information with this secondary lender in order to give you the green light to move forward with your purchase.
0 votes Thank Flag Link Sun Jan 4, 2009
Lisa:

Have your agent call the listing agent on this. This is usually a requirement on an REO and there is some flexibility, based on your strength as a buyer and who you are working with as a lender. Here is my experience on both sides of the issue, and hopefully this will clearly illustrate why having "an ace in the hole" or another lender who can close your loan is sooooo important in this market.:

1. A pre-qualification letter means next to nothing in todays market. You need to be Pre-Approved, which means you need to have submitted all you paperwork to your lender and had it reviewed by either their loan officer or their underwriter for sufficiency. Anyone can get pre-qualified by a broker or lender, however, athey are under no obligation to lend until the actual proof of income / employment / payment history is submitted and verified.
2. If you are Pre-Approved by a direct lender, most REO lenders will accept this. The problem is that too many people get pre-qualified by a mortgage broker (and they seem to hand these letters out without too much pre-thought) and then the broker cannot perform. As a listing agent, this is extremely frustrating. You have taken the property off the market, perhaps turned down other offers, only to have to start from scratch when the buyer cannot get the loan.

Here is a personal example: I had this happen with a Wachovia Pre-Qual buyer (not Pre-Approved) on one of my listings. They could not get the loan funded because they had mis-represented their income in the pre-qual process and could not provide the proof the lender required to close the loan. Please note, the property appraised for the asking price without a problem. Then once they were told they could not get the loan by their "friend" at Wachovia, the buyer did not want to cancel escrow because they really wanted the home. Unfortunately, even after we gave them an extension on time to close and they submitted applications with two other banks and two brokers, they could not get the loan. We were 45 days off market in a declining market. The home ended up selling for $40,000 LESS than this offer gone bad, almost 90 days after we were originally supposed to close, which was 45 days after the seller accepted the offer, ie. 4.5 months later on a home where the monthly mortgage payment for the seller was over $3,000 per month. If we had insisted on having their information submitted to a lender we knew and trusted we would have known about this much sooner and possibly saved a lot of people a lot of trouble.

3. An another personal example: The very first time I represented a buyer on a purchase of an REO, they were pre-approved by a mortgage broker. This was during the time when banks and lenders were failing daily. My pre-approved buyer was pre-approved with a lender who closed their doors before they funded our loan. We had to scramble to find another loan and fight the selling bank regarding per-diem late closing charges. If we had been pre-qualified or pre-approved with the selling bank, we might have been able to close on time.

Whether it is legal or not to require that you get pre-qualified by their lender is a question for an attorney. My experience right now is I have all my buyers "double app" or get approved by two lenders at the same time. This way, if their first choice cannot perform (which happens about 25% of the time right now), or changes the terms of their loan at the last minute, they can still buy the home they wanted.

Hope this knowledge helps to ease the pain of the process in these uncertain times. I am sure that your home and your loan are both out there waiting for you. Dare to Dream.

Shel-lee Davis
Real Estate Consultant
RE/MAX Palos Verdes Realty
0 votes Thank Flag Link Sun Jan 4, 2009
Yes Lisa I feel your pain, Banks are asking for these prequals through their own institutions to make sure that the buyer will qualify. They figure if they prequal you then you are good to go. In my market area Countrywide seems to be the lender. On a personal note I rather have a direct lender like Countrywide qualify my buyers than a mortgage broker. With a direct approval I feel secure knowing that they were strict in qualifying. Is it legal to make you qualify with the banks lender......... I figure it's not but if you send your offer without the prequal from their bank more than likely the listing agent will not present the offer.
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0 votes Thank Flag Link Sun Jan 4, 2009
Many foreclosures are now making that a requirement determine if you can close on a home. It eliminates much hardship at closing when buyer lender may have missed something day of closing buyer now cant close. Double check, that is it. It cause of drama with agruments over escrow money, buyer spending additional money on inspection, appraisals .
Web Reference: http://www.lynn911.com
0 votes Thank Flag Link Sun Jan 4, 2009
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