topic Re: Seller wanted Preapproval and would not accept Lender’s Prequalification Letter. in Mortgage Loans

Seller wanted Preapproval and would not accept Lender’s Prequalification Letter.

girlonmission — Tue, 04 Apr 2017 15:57:53 GMT

Hello Everyone,

I pulled the plug and applied with a lender directly about two weeks ago. Last monday, I received my approval letter, I say approval because that’s what I believe it is because I provided all my financials dox and my credit was pulled and reviewed the whole nine. See picture.

I found a house I love. I went and made an offer. The seller agent refused to accept the Pre-Qualification. I did some research, and it seems that everything is saying a prequalification is weak. But I am like, I got it from lender. I talked to the lender and she said, I am all good to go, just don’t increase debts and continue paying as I’ve been doing. All she needs is the contract signed by the seller and I, then they will provide a pre-approval.

My agent said he never seen a letter like mine before, and that my letter will not work because it has how much my payment shouldnot exceed. I asked my lender to reach out to them to explain, but she did not. My realtor tried many times to get a hold of her, even emailed, but she was always not responsive. When I had put the offer, I was the only person in the game. The house had already been seated for 160 days, and they had been calling my realtonr everyday wanted to know if we can provide it, plust they were willing to pay 10k in closing cosst. Needless to say, the seller had another open house last week, and received a similar offer like mine, but he accepted the other buyer because they had a Pre-Approval.

I told my lender that I lost the house becase of the letter issue, her words: I told your realtor that their request of the lender was illegal – NO lender can legally issue a pre-approval document until the fully executed contract signed by both parties is received and the file has been through an underwriter’s process. The lender that provided their buyer with a preapproval before underwriting is actually violating the laws of the Consumer Finance Protection Bureau. I don’t break the rules, as my license means a lot to me! I can’t believe a company or originator would jeopardize their license and good name like that.

Now I am going to look for another lender or another realtor.

Anyone else is seeing this?

Re: Seller wanted Preapproval and would not accept Lender’s Prequalification Letter.

Threeof5 — Wed, 05 Apr 2017 04:53:06 GMT

I'm not sure the details of what your LO may or may not have seen from your file, and unless I'm missing something, my company issues preapprovals all day everyday. It may have to do with a specific state law, but even then, we do business in most states, and it didn't stop someone else from having a preapproval that got the house you wanted. I equally value my mortgage license but I think your LO is mistaken, or some facts about your specific loan program aren't known.

There is a difference between a prequal and a preapproval, as your letter indicates. The former is essentially an opinion of the underwriter that you would be approved based on what you said on your application. A preapproval goes through an underwriting process, considering your paystubs, W2s, etc. and carries more weight than a prequal. The seller in your case, like most, want to know you have a preapproval so they can take your offer seriously. A prequal, while good on paper, can fall apart in actual underwriting if someone overstates or can't prove income, assets, down payment, etc. Not saying you did this, but this is the impression a seller and/or the seller's agent would think.

Re: Seller wanted Preapproval and would not accept Lender’s Prequalification Letter.

StartingOver10 — Wed, 05 Apr 2017 14:38:11 GMT

I haven't seen a PQ letter like that before...and I see them all the time from various lenders. Up until I saw your PQ letter, the worst one I have seen is from Wells Fargo where they won't commit to anything in writing The letter is as wishy washy as possible.

Your "checkbox" type letter looks weak - from a listing agent point of view. Why? Because it uses the phrase "should qualify" rather than a stronger phrase. That phrase has all kinds of wiggle room for the lender to come back and deny. Also with the next checkbox down the lender has reviewed your income and assets which is what we want to see. Did you actually supply your income and assets to the lender? If so, great. The letter should indicate that your assets and income were reviewed but your letter indicates that the income and assets weren't supplied (it's implied). Lots of times the gross income works but there is a difference between what the buyer says they have in income and actual income that can be used (especially for self employed). No one wants to get involved with a purchase and have the sale fail due to the lender not being able to close the loan. BTW, that is a seller's greatest fear.

If your lender has looked at your income and assets, why can't they issue a pre-approval?

If you like this lender, can you make an actual application subject to the selection of a property?

If not, I would find another lender if I were in your shoes. JMO.

Re: Seller wanted Preapproval and would not accept Lender’s Prequalification Letter.

ShanetheMortgageMan — Wed, 05 Apr 2017 15:35:27 GMT

Due to the lender not responding to your real estate agent in a timely manner, I'd drop them. What happens when you are under contract and information is needed from the lender? Will they be unresponsive then as well? It's a bad sign.

However, I don't agree with your real estate agent regarding the part where it lists your monthly payment. When someone is asking how much they can get pre-approved for, it's based on both a sales price limit (how much of a down payment they have translates to how much of a sales price they can purchase) and also how much of a monthly payment they can afford (for the debt to income ratio calculation). The real estate agent asking for a pre-approval letter isn't uncommon or a problem, so I don't see there being a new to choose a different one.

If they have a recommend loan officer who they have successfully worked with and is willing to provide a pre-approval letter, then you should probably contact them.

Re: Seller wanted Preapproval and would not accept Lender’s Prequalification Letter.

Revelate — Wed, 05 Apr 2017 16:21:00 GMT

@Threeof5 wrote:
I'm not sure the details of what your LO may or may not have seen from your file, and unless I'm missing something, my company issues preapprovals all day everyday. It may have to do with a specific state law, but even then, we do business in most states, and it didn't stop someone else from having a preapproval that got the house you wanted. I equally value my mortgage license but I think your LO is mistaken, or some facts about your specific loan program aren't known.

There is a difference between a prequal and a preapproval, as your letter indicates. The former is essentially an opinion of the underwriter that you would be approved based on what you said on your application. A preapproval goes through an underwriting process, considering your paystubs, W2s, etc. and carries more weight than a prequal. The seller in your case, like most, want to know you have a preapproval so they can take your offer seriously. A prequal, while good on paper, can fall apart in actual underwriting if someone overstates or can't prove income, assets, down payment, etc. Not saying you did this, but this is the impression a seller and/or the seller's agent would think.

Some lenders won't do a "Pre-Approval" Chase is a notorious and significant example of this (or at least was when I went through them) but FWIW their Pre-qual letter looked pretty much identical to a pre-approval letter except for the name. I have to assume there was some legal (read as potential lawsuit) reason they went that route... in this day and age they "appear" to be identical, it's just whether the lender is standing behind the letter or not. Still a lot of FUD around the whole thing, I know I was more than unhappy at the pre-qual letter Chase sent me shopping with... for all that it worked.

I know we went through a quick one-off conversation might have been in my old mortgage experience thread on what makes a good Pre-Approval / Pre-Qual letter, but my understanding is if the LO puts their name and contact information on there, any sellers realtor that's worth a darn should be contacting them directly to see how firm it really is. Mortgage is such a standardized beast that every RE professional should know what's required and what's not and can ask the relevant questions. That may be an ideal world but it really should work that way: nobody wants the deal to fall apart in the entire process, buyer, seller, both realtors, and the loan officer / bank, just talk.

I unfortunately agree with S10 though, I'm just a layman but that letter sucks just looking at it... lot of people would have a hard time getting around that I suspect.

girlonmission: out of curiosity what else did your LO put in the offer package?

Re: Seller wanted Preapproval and would not accept Lender’s Prequalification Letter.

StartingOver10 — Wed, 05 Apr 2017 17:17:15 GMT

^^^You are right Rev. We do call the LO and discuss (to a limited extent) the strength of the PQ or pre-approval. Some LO's will tell us they have reviewed everything and specify that they have seen the assets, income, credit and other LO's won't say anything as they "aren't allowed to discuss the buyers qualifications".

LO type 1 doesn't divulge private financial buyer info at all just that s/he has seen the info and s/he qualifies for the offer price based on the info received. We just want to know they have the capacity to close subject to an appraisal (or not) depending upon the offer. You can imagine how LO type 2 goes over - like a lead balloon and the buyer loses out typically.

Re: Seller wanted Preapproval and would not accept Lender’s Prequalification Letter.

Revelate — Wed, 05 Apr 2017 17:53:50 GMT

@StartingOver10 wrote:
^^^You are right Rev. We do call the LO and discuss (to a limited extent) the strength of the PQ or pre-approval. Some LO's will tell us they have reviewed everything and specify that they have seen the assets, income, credit and other LO's won't say anything as they "aren't allowed to discuss the buyers qualifications".

LO type 1 doesn't divulge private financial buyer info at all just that s/he has seen the info and s/he qualifies for the offer price based on the info received. We just want to know they have the capacity to close subject to an appraisal (or not) depending upon the offer. You can imagine how LO type 2 goes over - like a lead balloon and the buyer loses out typically.

Is this why at least in my case my RE simply went and put basically what I gave Chase into my offer package with the exception of redacted account numbers?

Basically a defense against a recalcitrant LO, as I have to agree if I were selling and the LO wouldn't give me crap and the pre-qualification/approval letter looked sketchy, even I'd be looking at some other offer most likely.

Re: Seller wanted Preapproval and would not accept Lender’s Prequalification Letter.

ShanetheMortgageMan — Wed, 05 Apr 2017 17:58:11 GMT

Revelate, I'm just giving you kudos for using the word "recalcitrant".

Re: Seller wanted Preapproval and would not accept Lender’s Prequalification Letter.

Revelate — Wed, 05 Apr 2017 19:01:39 GMT

@ShanetheMortgageMan wrote:
Revelate, I'm just giving you kudos for using the word "recalcitrant".

Re: Seller wanted Preapproval and would not accept Lender’s Prequalification Letter.

girlonmission — Wed, 05 Apr 2017 19:32:15 GMT

Relevate, ShaneThe MorgageMan and StartingOver,

I am in Florida. I applied for the FHA.

I talked to the first guy that took my application and gave him verbally everything – annual income, what I had in savings, checking, the lots. He ran my credit while I was on the phone. He said good, we can continue moving forward with the application. He said he is not licensed in Florida but he will pass my application to the loan originator who is.

A few hours later, I got an email from the originator asking for all my financials. I have provided all the documents – last 2 years w2, tax returns, 401 statement, copy of my id and social security card, a month of paystubs, etc.

She and I got on the phone and we chatted. I had provided the name of my county since I was doing FHA. Then 2 days later, I got the letter. She said any new statement from now on until the time, for me to forward.

Right away I had emailed her and said I found the house. She asked me for my realtor information so she can talk to him. I provided both the seller’s agent and my agent and the house information from Zillow. I also CC’d my realtor so he has her information and also I included a copy of the letter the lender provided me.

We put in an offer. The seller’s and my agent had questions about the letter. I asked her to call both of them - she didn’t. I’be calling and emailing her all the times; and my agent was doing the same too. Many times, I had to go to the first guy that took my application just to know if she is in the office. (I should not have to do that, especially since I have OCD and freak out when I am out of my elements – lost 2 nights of sleep over this).

To answer a couple of your questions you have:

The document does say – “document of income and credit report have been reviewed by the loan originator...” that’s why I thought it was an approval, plus she signed it and included your NMLS# and LO#.

I did not receive anything else from her exception my Congratulations letter explaining my down payment amount, to what percentage the seller can contribute.

I have decided to drop the lender and go with someone else, probably local. My agent is recommending a couple of lenders for me to review. I have been debating on quicken loans: my parents like them when they did their refinance but I hear some many stories in the forum – it makes me squeamish.

I did love the house. And I don’t think I would have lost it, if she had been in communication with the agents. Even when the seller countered offer asking for my full down payment in escrow, I emailed her a copy of the counter and asked her to call me. I ended up calling her instead. Because I wanted to be sure that I am good to and do not have to worry about anything especially if I am putting 10k in down payment. She said she cannot provide a pre-approval unless I have a contract with the seller. Otherwise I was good, but do not open new accounts and defaults on accounts. She did not foresee any problem with the investor not backing up my loans because I had an automatic underwriting approval.

here is the Congratulations Letter

Re: Seller wanted Preapproval and would not accept Lender’s Prequalification Letter.

girlonmission — Wed, 05 Apr 2017 19:30:15 GMT

I had to google Recalcitrant cause it sounded like a chemical liquid.

Re: Seller wanted Preapproval and would not accept Lender’s Prequalification Letter.

ShanetheMortgageMan — Wed, 05 Apr 2017 19:59:44 GMT

Yeah everything that you describe indicates it was a pre-qualification, even the letter says pre-qualification. A pre-approval is when the underwriter has reviewed.

Because you are seeking an FHA loan, I would not recomend you go with Quicken, the bad reviews on them are usually from people who had some difficult aspect of their file to get approved... the people who give them good reviews usually are people who have no issues at all with their file getting approved. I'd give the local lender a shot, they will be motivated to help you out and get pre-approved in the proper way.

Re: Seller wanted Preapproval and would not accept Lender’s Prequalification Letter.

girlonmission — Wed, 05 Apr 2017 20:10:23 GMT

yeah, I am definetly looking for local. There are some states and local programs I have been researching, I think they would be more familiar with them.

Re: Seller wanted Preapproval and would not accept Lender’s Prequalification Letter.

ShanetheMortgageMan — Thu, 06 Apr 2017 02:30:59 GMT

For sure they would.