SELLERS: An approval letter doesn’t mean the buyers approved

TIPS TO IDENTIFY A WEAK APPROVAL LETTER

Start at the top and work your way down…

1)Is there a company logo? Yes or no. If there’s no logo it can  indicate a small company or a one-man broker shop. It’s not necessarily bad but a layer of potential risk.

2) Is the company something you have heard of? Ask around in the office. Or you can call me, your broker or another agent. Someone in the office may have had a great experience or a bad one.

3) When was the last letter written? Do not accept a letter older than 30 days.

4) What is the rate? If you know the going rate is 6% and they show a 7% rate, be concerned.

5) Make sure your offer and letter match. If your letter was approved for 10% down but they write the contract 5% down, be concerned.

6) Make sure the letter identifies specific terms, rate, term, loan amount and sales price.

7) Does the letter indicate whether credit has been pulled? It SHOULD! And it should be a ti-merge report.

Does the letter indicate what outstanding conditions are existing? Verification of employment, assets, and income means the lender still has work to do.

9) DO NOT PUSH ZERO DAYS FOR FINANCING. THIS IS THE REASON THERE HAVE BEEN SO MANY DELATS FOR SETTLEMENT. One-third of the days is reasonable to ask for a commitment letter. Give the days, let the loan be underwritten, then follow up for the COMMITMENT LETTER.

In essence, pre-approved letters are not worth the paper they are written on. We have all seen approval letters that shock. With an enormous amount of unqualified lenders out there scrambling to stay in the business (because the refi market is gone) they will come knocking on our doors. The letter is only a good as the person/company who writes it.

This is all assuming that the borrower does not switch lenders after ratifying…