Palm Beach Real Estate and Loans

Today's post comes from (the slightly aggravated) Jason Price of Knightlines Mortgage Services:

(BTW - I can't stand the term 'pre-qualified'. Shoot for 'pre-approved', but hey, it's not my story!)

When a buyer wants to buy a home, the Realtor they are dealing with usually asks right off the bat: "Have you been pre-qualified or pre-approved for a mortgage?" Why is this such an important questions? There are several things a Realtor will know based on the provided answer and information to follow it.

Here is what the Realtor finds out:

• They have a legitimate buyer.
• They know what price range to shop for.

Okay, now keep that second point in mind as we delve into the pre-qualification process. And to explain this, I am going to use a recent buyers story:

The buyer came to us to be pre-qualified for the purchase of a new home. Based on early findings, we were able to qualify this buyer for a mortgage of $x.xx and a monthly payment not to exceed $y.yy. Now, the monthly payment took into consideration the basic PITI (Principle, Interest, Taxes, and Insurance) for a home of that value for which she qualified for.

When we told the Realtor what the borrower qualified for, we also explained which programs the buyer was eligible for. In this case, if the buyer wanted 100% financing through USDA, then the loan amount could not exceed $a.aa and a monthly payment of $b.bb. If the buyer put 3% down, then HomePath financing was available at a mortgage amount of $x.xx and a payment of $y.yy. Conventional and FHA financing were not options.

Pretty straight forward, right? Wrong. The buyer is insisting on a home in a neighborhood where the HOA fees are over $200/month. Yes, the home prices are in the range that the buyer is qualified for, but the monthly payment is well over $200 for what they are eligible to borrower. Now with HomePath, we were able to get a FNMA DO/DU approval even with this $200 a month increase, but the home the buyer wants is not HomePath approved.

There are homes in that area, in that same neighborhood, in that same model, that are on HomePath, but someone did not show them to the buyer. I am not going to speculate why they were not shown. But I am going to ask, why did the Realtor allow the buyer to enter into a contract, put earnest money down, when they have something in writing that states what the buyer qualifies for and that property does not meet that criteria?

Oh, wait... it does. It meets the value of the house. The Realtor only listened to the buyer when they asked the question, "Have you already been pre-qualified for a mortgage?" The answer was probably something like this, "Yes, I was pre-qualified for a purchase price of $x.xx." So, when the Realtor got our letter, they just checked to make sure the purchase price was what they were told. Monthly payments went right out the window.

Now, I am not pointing fingers as to who is to blame because it can go many directions. But as a potential home owner, the buyer should have said right away when they learned of the $200+ per month HOA fees, that the house was now out of range. However, when we got the approval from HomePath to continue with that price range with the HOA fees, the Realtor should then have switched to HomePath homes for those homes with higher monthly payments.

In the end, a pre-qualification or even a pre-approval is only as good as the terms that are given in it. Going outside those terms, means a big fat DENIED!!! If one does not listen to the terms, then a lot of time is lost and possibly a lot of money. Communication is key. Each player of the buyers team needs to be clear as to what each other team member is doing to help direct that buyer to a victory of a new home. If you find a team member slacking, wake them up and tell them to get on the ball. If they continue, bench them and bring in the second string.

OK, by now most consumers realize that they should have financing in place before even starting to look for real estate - so I won't beat up on that topic any more!

(BTW - even if you're not a first time buyer take a look at First Time Home Buyers Rule, it contains great advice for all Buyers.)

What I DO want to emphasize is that you need to be quite sure of the accuracy of what you've been told.

Most people use the terms PRE-QUALIFICATION and PRE-APPROVAL interchangeably and that can lead to a lot of problems.  There is certainly some fogginess in the two terms, but in general this is the way things go:

PRE-QUALIFICATION:

You go to a Mortgage Broker and say you need a loan for $x.  All too happy to help, the Broker asks you a few questions:  Do you have a job? Do you think that you make enough to afford the loan?  How's your credit?  Do you have enough money in the bank for an appropriate down payment?

If all of the answers are proper then YES, you are pre-qualified!!

All valid questions of course.  But we're missing something important here..... PROOF! Without that, you've got nothing.

PRE-APPROVAL:

You're basically going to be asked the same questions about your credit, income and assets BUT you will need to furnish proof of everything before an answer is given.

You'll provide employment history and current pay stubs, a credit report will be run, you'll provide bank statements, etc.

You're basically doing everything in the loan process  - the only thing you don't have is the specific property that you want to buy.

At that point a formal letter is sent out to your Real Estate Agent saying that you are PRE-APPROVED for a mortgage for $x, with y% down for a particular type of property.

If you have any questions, or to get pre-approved for a Palm Beach Gardens mortgage, just call me @ 561-282-7406 or fill out Knightlines' Application form.

What makes more sense-

Knowing what you can afford BEFORE looking for real estate....

Or finding something you want to buy and then hoping that you might be able to get the $$?

The answer is pretty obvious, but for years consumers have been doing the exact opposite!

Not only is it more sensible to know BEFORE, but more often than not, real estate Agents will not even show property unless the potential Buyer is pre-approved.

No savvy Seller will ever accept an offer to buy without a pre-approval (or proof of assets if it's a cash offer).

I've had people tell me that that is obnoxious, but look at it the other way around.  Think like a Seller: which situation sounds better to you - one where the Buyer has proof that they can get the home loan or one in which the Buyer wants 30 days to find a loan after you accept their offer?

It's a no-brainer.

A real pre-approval is only issued if a full loan application is submitted, credit is checked and income and available assets are verified.  At that point the results are issued, signed, on the Lender's letterhead.

Some people think that this process could take days, if not weeks, to complete.  Not true.

Call me-

Today's topic is: Pre-qualification vs Pre-approval and how they affect your search for Real Estate in Palm Beach.

Before getting into what's what, the basic idea is that BEFORE you start looking around for your new Home, you need to know how much you can borrow. (If you're paying cash, just skip ahead to the next article!)

That makes a lot of sense - but you would be surprised at how many Clients want to look at Property before checking into a mortgage.

I've had many people come to me over the years trying to get a Loan to buy property that they couldn't possibly get approved for.  I felt badly for them - they found they Home they'd been dreaming about and then got a big disappointment.

In addition to that, most Realtors® won't even take a Buyer out to look at property if they haven't been pre-approved!  Your initial reaction might be that they're being a little pushy, but it makes no sense to show people things that they won't be able to get.  On the Seller's side of the fence, the majority of the time an offer to buy won't even be considered if the Client isn't pre-approved.

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Unless you are one of the lucky few that can pay 100% cash for your new Palm Beach Real Estate, you are going to need  financing.......

Today I'm going to begin a series of posts that are aimed at explaining the entire Mortgage process from beginning to end.

The funny thing is that it really ISN'T that complicated - it's just been made to seem that way by the more unscrupulous people in the business.  They have the need to make it seem like you're headed into some horrible haunted house - and only THEY can protect you!

There is another,  much easier way to protect yourself: BE INFORMED - that way no one can pull the wool over your eyes.

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