Complying With The Golden Rule (Still)
Admittedly, it’s not a perfect analogy: I’m hardly suggesting that all Realtors are wizards, and that lenders are all witches (sometimes, it’s the other way around).
But, at least from the perspective of a Buyer’s agent, clients (especially first-time Buyers) can seem a little bit like Dorothy, and the process of procuring a Pre-Approval Letter just a little like the challenge of obtaining the Wicked Witch’s broomstick.
Getting to the Starting Line
So, to get that simple piece of paper (and ultimately, a mortgage), Buyers have to document how much they make; what they owe on any outstanding student loans; their credit scores; how they propose to tap the equity in their current home (assuming they have any, and they’re move-up Buyers); their most recent tax returns; how much other debt they have (credit cards, etc.).
And whatever else the lender requests.
Uggh!
All of which makes it feel a little cavalier for agents to say to Buyers — as I do — “please send me a copy of your Pre-Approval Letter, and we can get started looking at homes” (in truth, I’m a bit more involved than that, and often connect clients with reputable lenders, help them navigate lender disclosures like the “Good Faith Estimate,” etc.).
Qualifying Buyers
Cavalier or not, Realtors who skip properly qualifying their Buyers often regret it.
In particular, they run the risk of one of these three things happening:
One. The Buyer can afford less home than they thought.
If an agent shows their client a dozen, $300k homes, and it turns out that all they can afford is $225k . . . the agent (and their client) just flushed a lot of time.
The agent also now has a frustrated, disappointed client, who is going go see another batch of homes that don’t compare well to the (more expensive) homes they’ve already seen.
Two. The Buyer can’t buy until something happens.
That “something” can be as innocuous as filing a tax return for the current year.
Or, it could be as significant as selling their current home, waiting for more time to elapse following a previous short sale or foreclosure, or paying down other debt (such as student loans).
Three. The Buyer can’t buy at all.
That can be the case if their credit scores are truly horrendous, they’re between jobs, have zero money for a down payment, etc.
While there always seems to be a lender out there who’ll lend to marginal Buyers, their rates and fees are so onerous that most such Buyers would be (much) better off simply waiting until their financial situation improves.
Bottom line?
As exciting (and tempting) as it can be to hit the market with new Buyers, doing things out-of-order isn’t likely to get them home (sorry).
See also, “‘Guaranteed’ Pre-Approval Letters“; “The 2nd Most Important Date in a Home Sale“; and “Pre-Approval Letters & Written Statements.”
