Warning! Some pre-approval letters don’t mean anything
May 16, 2013 § Leave a comment
I closed a transaction today on the West Bank of New Orleans in approximately two weeks after my Buyer client’s loan was denied by Capitol One Bank. How did I get this accomplished? I referred him to one of my preferred lenders that actually knew what he was doing!
My client received his is “pre-approval” letter in February and selected a home. After intense negotiations on a number of different offers and counter offers we had to move on because the home owners insurance was going to me unattainable (that’s a different blog). Anyway, we sent up the purchase agreement to the loan officer and spent a lot of time processing it. Not once did we have a concern that the debt-to-income ratio for the Buyer was going to be a problem.
So, we get to the second house and successfully negotiate a contract to purchase. Again, no red flags or concerns were brought up during the process of inspections, repairs, title search, and even the appraisal. It wasn’t until AFTER the appraisal was ordered and paid for that Capital One denied the Buyer due to being over the debt-to-income ratio. This over-sight is unacceptable and should never happen. A professional, competent loan officer will let you know the truth, up-front at application.
Anyway, I didn’t panic and I calmed the Buyer. I referred him to Rob Chauvin with Republic State Mortgage and the Buyer was conditionally approved 24 hours later. Rob cleared conditions with the underwriter quickly and efficiently. Capital One Bank cooperated with the assignment of the appraisal to the new lender. The Buyer was amazed and very thankful for our extra effort – he got his home!
When you go to get pre-approved please rely on your REALTOR to recommend someone. Be wary of “on-line”, out-of-state lenders that make promises they usually can’t keep i.e. interest rates, low closing costs, or closing time. I would prefer my Buyer clients work with loan consultants they can meet and talk with in person – it makes a lot of difference.
Some pre-approval letters don’t hold much weight and that is why our Louisiana Buy or Sell Agreements to Purchase have language that allows the Seller to cancel the contract if the Lender cannot deliver on important verification of pertintent information. Loan denial is the #1 reason for real estate transaction fall throughs. Work with people who come highly recommended, are honest, and are accountable to you and the REALTOR that referred you. Here’s a great link for more advice. http://goo.gl/SJwDl