Mortgage Pre-Approvals and Open Communication

Prior to all of the issues surrounding the sub-prime mortgage sector, which has caused most if not all lenders to tighten their underwriting guidelines, a mortgage broker could issue a pre-approval letter based on the fact that they would definitely be able to place the loan somewhere. An applcation, in most cases, would be taken and credit run and a pre-approval letter could be generated within an hour. Stated Income, First Time Homebuyer, 100% Financing, a late payment on an existing mortgage -- these and others were non-issues.

Well, the times have changed! I know mortgage brokers who've used the quick issuance of a pre-approval letter as a way to gain the confidence and hopefully the business from customers. You still have the stellar credit, high income borrowers who are putting down 20% and can get approved everywhere. But, those people are few and far between. It is now imperative to take more time and effort to ensure that the loan that you pre-approve your customer for can actually close. A credit approval at the very least and ideally a commitment letter from the bank is now what you should provide to your customers. You also need to counsel your customers and realtors that "may" have issues down the line that banks are constantly changing their guidelines and that based on the information provided and on the current credit situation, I can place your loan today. That may or may not be the case tomorrow.

Obviously, I am referencing customers that today would fall into the Alt-A or Sub-Prime buckets. People who can't prove their incomes (self employed), don't have a ton of assets, have a low credit score. I know personally of many sales that have been falling through due to the buyers not being able to obtain the financing that they thought they could get. Providing honest information throughout the process can help to avoid this. (http://www.stevehawkmortgage.com/)