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.