Outstanding article at WashingtonPost.com concerning pre-approvals not being “worth ink they’re printed with.” This is an all-too common practice right now with the aggressive lending environment in which we are working.
More than half of the participants in a nationally representative statistical sample of realty agents identified unreliable or bogus preapproval letters as a key cause of breakdowns in transactions. The agents said 39 percent of all preapprovals issued by Internet-based lenders are faulty or “invalid.” Nearly 30 percent of mortgage-broker-issued preapprovals are in the same category, along with 1 out of every 5 preapprovals from national lenders.
I generally regard “pre-approvals” from internet lenders as less valuable and less credible than those issued by either national or local lenders.
All of the lenders with whom I work issue letters that meet basic, simple standards.
Any valid preapproval letter must be explicit about its limitations and conditions. It must disclose, for example, that the amount offered is subject to a full appraisal, formal underwriting and receipt of an acceptable contract. It should state that the interest rate quoted is not locked and could change. No preapproval letters are worth looking at, Wilson added, if the lending institution has not thoroughly checked credit files, income and cash on hand.
As always, knowledge is power. Do your due diligence.
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