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"As a first-time homebuyer, I was nervous about the entire process. Step by step, Joe made it easy and fun. His expertise in the Columbus real estate market is a tremendous asset. He is highly recommended!" - Nicolette Horan, March 08
"I wanted to say thank you again, so much, for all your hard work. I know that you really put a lot of time into this transaction and I really, really appreciate it. I'm so happy I got the house and it all worked out and I just wanted to say thanks again, you did a great job and i really appreciate it. I will put that on the survey when they send it to me.
If there is ever anything I can do for you, please don't hesitate to give me a call. I will refer every single person I know to you. I'm going to go get my dog and we're going to sit on the floor of our new house and have a glass of champaign. Thanks a lot Joe" -- Michael Mamp, Feb 08
Pre-Approved? Think Again, You May Not Be. A Cautionary Tale
March 28th, 2008 categories: Mortgage/Finance
Everything in the mortgage industry is changing on a daily basis. Each week, each day, these changes are effecting the Columbus Real Estate Market in very real ways. If you were pre-approved by your lender more than a week ago and you are about to call and begin seriously looking at homes for sale in the Columbus area, call that lender again before you call me and make sure that nothing has changed.
I have a fantastic couple from Houston that have moved to Columbus to take advantage of a great new job. The problem was that they have to sell the home they have in Texas before they could buy the long-term home of their dreams in Central Ohio. Despite a hefty student loan payment, they wanted to purchase something so as not to throw money away renting while their Texas home was on the market.
They would buy something “good enough” for now, get to know the area better, and fix up the purchased home over the course of a couple years. After the Texas home sold, they’d have lots of extra cash left over each month and they’d put that toward student loans and other debt. Then, in 2 1/2 or three years, they’d sell the interim home and be able to easily purchase a great home in a great neighborhood and not have to worry about moving for a long, long time.
They contacted a local lender and were approved for a program that concentrated on their earnings and not their debt to income ratios that included the Texas mortgage payment. It was a stated, no document loan. While this has traditionally been a loan product that gets a bad rap as a nice loan for drug dealers and Mafia types who don’t want to, or can’t, show where the money comes from, it’s also a good product for people like this, the self employed and others with stellar credit who might not mind paying a bit more in interest.
OK, the lovely Houston couple is pre-approved contingent only upon an appraisal. We go look at houses. They find one that fits the bill. We negotiate like crazy. The Sellers agree to closing costs, a 2 week possession and closing, and a new roof. Hurray. The home appraises for just over the purchase price, every one is happy. The sellers move out and move into a three month lease while they look for a new house.
At the same time, the guidelines to lend on the buyers loan product changed. The lender needed employment verification, past employment records, tax records, guarantees of future earnings, additional comps, one thing after another. The lender received almost everything they needed. One of the buyers had a mostly commission paying job so their employer couldn’t supply any sort of guarantee as to future earnings. The nice Houston Couple can’t get the loan, they can’t buy the house.
There is an outside chance that a different lender, the backup lender we were pre-approved with earlier this week, will come through and we’ll close this afternoon but the day is wearing on and still no word. I gave the names of every lender I thought had a remote chance of being able to do this type of loan—nothing. In the meantime, we were supposed to close a week ago today, they were supposed to move in last week. They have a U Haul. They have been living in a hotel here for two weeks because they both already started their jobs. They only took about 5 days worth of supplies and clothing to the hotel, the rest is packed away. Oh, and they have their two Huskies with them.
My favorite Houston couple didn’t think they would get approved for a loan until after they sold their house. They were happy and surprised when they were approved. It was a slam dunk, just the right loan product to fit their situation. They did everything right and played the game by the book but the rules of the game changed. They will now end up renting a home until the Texas home sells and we’ll find the permanent home soon afterword. They’ll be OK. The Sellers, who bent over backward to accommodate us in every way, however, won’t be very happy. Whose fault was this? Not the Sellers. Not the Buyers. Not the Lender even.
It’s a new day out there in the mortgage world. 100% financing, no doc loans and loans to low credit buyers without bigger down payments are going the way of the dodo bird. Think you’re pre approved? Don’t think, make sure every week until you close on your house.
Coming Soon – Why FHA is your Friend (or) This ain’t your Father’s FHA
Bill steele
March 28th, 2008
Ever since the markets have crashed ,the mortgage market has been fluctuating a lot.This is not only disturbing columbus real estate market but many other markets.
Bad Debt » Blog Archive » Pre-Approved? Think Again, You May Not Be. A Cautionary Tale
March 28th, 2008
[…] Read the rest of this great post here […]
Christian
March 28th, 2008
Yes, this happens in all markets. A good loan officer will tell you this up front…”the market is funny, underwriters get spooked easily these days, don’t be surprised if they give us some hoops to jump through”, etc, etc. The upside is good prices, selection and fantastic rates. Pros and cons…
JD
March 28th, 2008
Interesting post, especially since I’m self employed with not so great credit and looking to buy in the next two years. Definitely will start saving up that down payment.
Looking forward to the FHA post.
Dave Pulsford
March 29th, 2008
That’s a good story, and a growing concern in the UK market.
Uncle Jack (Jack LeVine)
March 30th, 2008
In Las Vegas, we finally have real buyers looking at the nice homes, instead of investors scooping up amazing give away crappy bank owned properties.
Our problem is now getting appraisals, when the only comps were trashed out REO’s at 40-50% off of the the 2006 highs. It’s a nightmare no matter what the market.
Jeremiah Arn
March 31st, 2008
What a great post, Joe.
Sorry you got blindsided. Market volatility = stakeholders getting blindsided. I think you’re advice was dead on. Many bankers and brokers are advising clients that ALL loan programs are subject to review. Fortunately, most lenders will give about a week’s notice to get a loan submitted and locked before a program gets axed.
I think it would be helpful to share the lender’s name - not the brokers, but the actual lender’s.
buy houses
March 31st, 2008
With the help of the house financing, many number of sellers are listing their house properties in the house property market and the buyers are purchasing the house property that are listed in the house property market . Purchasing the house property from the market is not the difficult task and some of the buyers consider it has difficult.
Jon Bunn - Ashburn VA Real Estate
April 1st, 2008
Yikes Joe. You are right. It is more than important now for buyer to have an approval from a solid lender and lock in asap. Good article. I am working with one of these situations right now.