Does it make sense to get multiple per-approvals? Why or why not?

Asked by Martabar, San Jose, CA Thu Nov 21, 2013

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Theresa Vuong, Agent, Milpitas, CA
Thu Nov 21, 2013
Hello Martabar,

You have posted a great question. Depending on your financial situation, the answer will vary.
In my opinion, I would recommend obtaining a pre-approval through a retail lender (like Wells Fargo, BofA, CHASE, etc) AND one through a brokerage or smaller lender, that way you will get an idea of what rates you're being offered from each and what your pre-approval amount is. Depending on the lender's guidelines- you maybe pre-approved for more or less, depending on your financial situation. And when asked, you won't have to waste additional time to obtain an additional pre-approval letter.

With today's crazy market and a vast range of lenders out there, at the end of the day, we as agents just want to see the deal done. Agents will be more comfortable seeing your pre-approval letter from someone with a track record and if it's coming from someone they know and closed a deal with before, that's a big plus.

Getting a good rate, doesn't necessarily mean you're getting a deal. You may have gotten a good rate at Lender A- but if the loan processor doesn't know what they're doing or don't know how to structure your file- it may cause delays and worst of all- cost you to lose the deal. Lender B- may have a slightly higher rate- but they can get the deal done or vice-versa.

I must re-iterate- getting the deal done is the most important part so it's crucial that the lender can perform. What's more important to you? For example: Getting an interest rate at 4.25% and not sure if the lender is able to close the deal or 4.75% with a lender that can get you into a home in the next 30 days?

So how do you know who can get the job done? In my opinion, ask for multiple referrals from your agent. And then INTERVIEW those loan officers. Nothing is guaranteed, but a referral with a track record is usually the best bet. With new laws in place, Realtors can not get kick backs/referral fees from lenders- so there shouldn't be a conflict of interest with the referrals.


If you have additional questions, please feel free to contact me.


Sincerely,

Theresa Vuong | Realtor®
CalBRE#: 01871194

Email: theresa.vuong@interonha.com

200 Serra Way, Suite #45
Milpitas, CA 95035

Fax: 1.888.845.5888
DIRECT: 408.858.8876



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1 vote
Bahia Fear, , San Jose, CA
Thu Nov 21, 2013
Hello Martabar,

Good question…one that I’ve run into many times. No, you don’t need to get pre-approval from multiple lenders as an active buyer.

The first step is to review your credit and make certain you have a decent credit score as this will affect your lending options. There are a few things you can do to help increase your score. Feel free to contact me and I can email you some resources. The second step is to find the right lender that is the best fit. Shop rates online and make calls to different lenders to start building relationships. While shopping feel free to ask for a pre-qualification which is the step before a pre-approval. A pre-qualification is an estimate of what the lender will allow you to borrow based on a verbal debt to income analysis. If you have an idea of what your credit score is when you go through the pre-qualification it will give you a more accurate scenario. You can use the pre-qualification process to determine which lender or lender’s you want to work with. At that point you can request a pre-approval from the lender(s) on the top of your list.

Note: A pre-approval means the lender pulls your credit and this can negatively affect your credit if done multiple times in a wide span of time. Which may be negligible but if you are on the edge of an OK score and a slightly bad score you should be aware of this. Timing is important as pre-approval letters are usually valid for 3 months. Keep in mind – a good lender will help walk you through this process. They will also understand if you chose to go with a more competitive lender since rates from different lenders vary and the incentives such as no closing costs also make a difference.

Good article that answers your question in detail: http://budgeting.thenest.com/prequalifying-several-lenders-h…

Bahia Fear 408.391.6722
http://www.bahiafear.com
BRE 0192998
1 vote
CA BRE 01929938
Flag Thu Nov 21, 2013
Juliana Lee…, Agent, Palo Alto, CA
Thu Nov 21, 2013
No, looking around and getting multiple pre-approvals based on quoted rates does not make sense. Almost always a seller will call your lender to verify your pre-approval letter. If the seller see's that your multiple pre-approval letters do not have a credible reason for being given, you could hurt your odds of having an offer accepted.

When you make a purchase offer you should review with your real estate agent how the seller views your lender. Different lenders have different lending criteria affecting both what they offer you and different credibility in the eyes of a seller and their agent. It is not rare to get a second lender based on specific goals.

You need to always keep in mind that a business person providing a service, provides the best service to their best clients. They will put more effort into helping someone who is likely to give them paying business than someone who is just looking around. If a lender has criteria that puts their program at a disadvantage tell him and give him a chance to respond. If your lender sees he cannot fulfill your needs he will surely be disappointed but also understanding and potentially helpful.

Basic mortgage information can be viewed at http://julianalee.com/reinfo/mortgage.htm

Juliana Lee
Top 2 agent nationwide at Keller Williams Realty, the nations largest
Cell 650.857.1000
juliana@silicon-valley-homes-for-sale.com

Over 20 years experience
Over 1,000 homes sold in Santa Clara County and San Mateo County
.
Web Reference:  http://julianalee.com
1 vote
, ,
Thu Nov 21, 2013
J.R Thrasher is right, if you find the lender that quotes the best rate, you may have only found the biggest liar. This lender will then be forced to try to drag things out if the market does not move favorably. After all until you have a property they are not locking in anything anyway they can tell you anything they want.

Usually I am one of the least expensive lenders on most loans, on the times when I am not... I tell people to use me anyway. Why?

I can give you a strategic advantage when you go to buy a house because I have a guaranteed funding program.

This can save you time and money when buying a house.

Call me if you want this kind of service 949-297-1207
1 vote
JR Thrasher, Agent, San Diego, CA
Thu Nov 21, 2013
Don't just shop the rate, shop the customer service. I usually send my clients to lenders that have some type of closing guarantee. That way if the loan takes a long time you don't have any out of pocket expenses.

J.R. Thrasher
http://www.SanDiegoRealEstateVeterans.com
619-929-0105
1 vote
John Souerbry, Agent, Fairfield, CA
Thu Nov 21, 2013
Yes, it makes a lot of sense. Between the time you get pre-approved and when you actually find a property you want and have your offer accepted, loan programs or qualification requirements might change. You don't want to find that perfect property and then discover that your pre-approval is no longer valid.
Get pre-approved by 3 different lenders - and not all through the same broker. Don't wait until you're under contract to buy a place, at that point you'll have other things to worry about and the clock will be ticking towards closing.
1 vote
Martabar, Home Buyer, San Jose, CA
Thu Nov 21, 2013
Thanks everyone for taking the time to post your answers - all valuable advice, but some conflicting opinions out there!

For those of you who answered "NO, you should not get multiple pre-approvals": So, if you get a pre-approval with only one lender aren't you running the risk of scrambling last minute to make contacts/finding best customer service/finding best rate? Is there a way to intelligently shop around before you get the pre-approval so as to avoid last minute craziness?

For those who answered "YES, you should get multiple pre-approvals": is it generally bad business to get a pre-approval from a lender and then walk away later? Also, what guarantees do you have that they will have the best rates later?

Here is the full scenario I have in my head:
Let's say that you get a pre-approval with a lender that has the best rates today. However, your rates will not be locked down. So when you find a house, that same lender may not end up having the best rates and you need to go shop around again and find with a different lender all last minute.

Am I missing something?
0 votes
If all lenders were equal except for rate, then shopping for the best rate would make sense. Lenders have different programs and the best choice can be different for different buyers and even different properties. Different lenders have different credibility in the eyes of the seller/agent. You may find a lender who has the best rates but very few seller's will want to work with the lender ... your purchase offer won't be accepted. Find a trustworthy lender, work with him, if problems surface or his rate isn't competitive talk with him. A top loan agent may even recommend a competitor if the choices he can offer won't work. Even different loan agents at the same lender can achieve different results.
Flag Mon Dec 9, 2013
The key is to start connecting with lenders in the short-term and get information so you are comfortable with the process. Get a pre-qualification over the phone and talk to them about their rates. Ask them to provide you with some scenarios of what your mortgage could look like based on rates, down payment, etc. Ask how quickly they can close once you are in contract. Be up-front and tell them you are doing your due diligence and ask them for advice. Build rapport because whichever institution and representative you chose to do business with - it will be for the long-term once you have a mortgage with them.
Flag Thu Nov 21, 2013
Re: " Here is the full scenario I have in my head:"

This is why I advise NOT going to a Retail Bank! Go with a Mortgage Broker/Banker that gives you the full option to pick the best rate the day you want to lock your rate!
"Retail Banks vs. Mortgage Broker/Bankers":
http://tinyurl.com/6qln6nd
Flag Thu Nov 21, 2013
Steven Ornel…, Agent, Fremont, CA
Thu Nov 21, 2013
Hi Martabar,

"Does it make sense to get multiple per-approvals? Why or why not?"

Well, if you obtain the best type of “Pre-Approval", no; however, be aware that until you actually lock your %rate your "Pre-Approval" could be voided by an interest rate hike.

In truth, there are three levels/types of "Pre-Approval". There are key differences between a "Pre-Qualification", "Pre-Approval" and what I call a "True Pre-Approval", which you should absolutely seek; please see: http://www.Steven-Anthony.com/GettingStarted for a full run-down.

Here's another important point regarding where to obtain your "True Pre-Approval":
"Retail Banks vs. Mortgage Broker/Bankers": http://tinyurl.com/6qln6nd

-Steve
0 votes
, ,
Thu Nov 21, 2013
No. What you want to do is shop around to find the best rate and then get a pre-approval letter from them.

Alex Greer
Loan Officer
NMLS #1056079
http://www.TheMortgageOutlet.com

408-352-5147
AGreer@TheMortgageOutlet.com
0 votes
Gregorio Den…, , San Diego, CA
Thu Nov 21, 2013
No it doesn't make sense. What makes sense is to get 1 good one that actually means something. Pre-approvals do matter when making an offer. Some are not worth the paper they are written on while others detail a full picture and instill confidence in your qualifications. All you need is one pre-approval. Once you go into contract, you are under no obligation to use the person that pre-approved you so you are free to shop for the best rate/service/etc.

My recommendation is that you find one person that will properly pre-approve you by verifying your credit, employment, income, assets, down payment and all seasoning requirements for them. In addition they should obtain a tri-merged credit report with score and run automated underwriting on your file.

Note that I say one person rather than one company. When shopping for a mortgage, it's the individual that will make the biggest difference in your success or failure.
0 votes
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