🚨 Attention Homebuyers! 🚨
From a mortgage broker's perspective, pre-approvals aren't worth much more than the paper they're printed on—they essentially serve as a rate hold.
Here's why:
If I submit a deal to a lender, I can input whatever numbers I want on the application to get the lender to approve it.
In another scenario, a client might fill out the application on their own with a bank, and the information remains unverified. The deal is then submitted for pre-approval based on the client's estimated income. The lender's main focus is on whether the income numbers support the pre-approved mortgage amount and if the credit score meets the requirement.
❌ What's missing in pre-approvals:
Lenders are not reviewing documents or conducting an in-depth analysis of the credit bureau.
A client might meet the minimum credit score requirement, but when reviewing credit for a live deal, lenders could uncover multiple missed payments, collections, or judgments, leading to a rejection from the lender or insurer.
A client's perception of their income and what the lender will accept can impact a pre-approval.
Moreover, pre-approvals are often not submitted to CMHC or another mortgage default insurer. Even if the lender is on board, they still need approval from the mortgage default insurer for an insured purchase. The primary reason pre-approvals are not underwritten is that if they underwrote every single pre-approval, they wouldn't have the capacity to deliver good turnaround times on live deals. In reality, many pre-approvals approved by one lender often get placed with another lender.
A good mortgage broker will:
Request all supporting documents upfront
Verify income
Determine usable income
Review credit
Assess the borrower's ability to qualify
In cases where there may be issues, they take the credit and income to a lender upfront for an opinion on whether or not they would proceed. Additionally, mortgage brokers can mitigate, fix, and explain some of the credit issues. With a good story and rationale, we can turn a decline into an approval.
📋 Why it matters:
A pre-qualification letter from a good mortgage broker far exceeds a pre-approval from the bank.
Although I cannot divulge a client's personal information, I would advise clients or Realtors that there may be potential issues in the file and to proceed accordingly.
If I uncover potential issues but believe there is a good chance of obtaining financing, I will exhaust all my resources for lenders and utilize all mortgage default insurers if needed.
The property needs to be approved, as there might be issues known to the lender and/or mortgage insurer that will result in a decline.
If a client must use “Alternative” financing, there are no pre-approvals and no guarantees. Every file is underwritten individually and can be a long, drawn-out process.
Yorumlar