How can a preapproval change?

MortgageWhen someone becomes “preapproved” for a mortgage, it boils down to they qualify for a certain mortgage payment based on their income and debts (DTI aka debt to income ratio).  A home buyer qualifies for the loan amount of the new mortgage and their funds available for down payment and closing cost determine the sales price.

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Tis the Season for Vacations

Many families are squeezing in a vacation during the remaining days of summer. I can’t blame them, I’m just back from one myself! If you are in the mortgage process, it’s critical that your let your mortgage originator know of any vacation (or business travel) plans. 

If you’re going to be in a spot where you can receive important documents and respond to emails, it may not be a huge issue. If you’re going off the grid, it may impact your rate lock commitment if your loan is currently locked. Your mortgage originator will need to price out a long enough lock period for your loan (if you’re locking) or you may opt to float and not lock in the current rates available.  And of course, if you run out of time with your lock, the rate lock commitment may be extended

Another factor is signing your final loan documents. Escrow companies can email (I do not recommend sending final docs via email) or send your loan documents via something like FedEx or UPS. This can be a bit risky as well as if a signature is missed or something is not notarized properly, your transaction may be delayed.

The more notice you can provide your mortgage originator about vacation or business travel, the more time they will have to prepare your options for the mortgage process.

More Listing Agents Performing “Sniff Test” on Mortgage Originators

IStock_000019730096XSmallI’m noticing that more listing agents are performing, what I like to call, “sniff test” to check out the lender who has prepared the preapproval letter. By the way, I think this is an excellent idea. This is especially true if the listing agent is reviewing multiple offers, which is happening more in the greater Seattle area with non-distressed homes that are desirable and priced right.

The sniff test is typically a phone call by the listing agent so they can get an idea about the mortgage originator. The listing agent should not ask personal information about the potential home buyer (such as credit scores or available funds). 

When a listing agent contacts me, I know they’re sizing up:


  • how quickly I returned their phone call or email
  • how experienced I am at closing my clients specific mortgage program (for example, Fannie Mae Homepath, Freddie Mac Homesteps or FHA transactions)
  • how long I’ve been in the mortgage industry (over 12 years at Mortgage Master Service Corporation)
  • how quickly we can close by
  • to learn more about our company (family owned and operated since 1976)

I’ve heard from many local real estate agents that they need to make sure the loan can actually close. Often times, a preapproval letter may not be worth more than the paper it’s written on if the mortgage originator has not done their homework with the actual preapproval.  NOTE: you are NOT preapproved unless you have provided your mortgage originator your income and asset documentation. 

I wrote about “investigating your preapproval letter” many years ago at Rain City Guide. The issue with preapproval letters then was probably that anybody and their brother was a mortgage originator back in 2007. Now there are far less mortgage originators however, if the mortgage originator works at a bank or credit union, they may still lack experience (they’re not required to be licensed). A licensed mortgage originator may be new to the industry as well. Some large internet mortgage companies have been hiring LO’s who can pass the national exam but still lack experience. There’s a big difference between being a good a passing exams and successfully closing loans.

While the number of mortgage originators is dramatically down, it’s still important to make sure your mortgage originator has the capability to see your transaction to closing. It may be a consideration to make sure your mortgage originator can pass a sniff test.

Seattle Bidding Wars: What You Need to Know to Help “Win” Your Home

I’m noticing more “bidding wars” on new listings in the greater Seattle-Bellevue area. Because of the lack of non-distressed inventory and current low interest rates, multiple offers may occur driving the sales price higher than the original offered price. Sellers and listing agents may try to create an environment for a bidding war by slightly delaying the review of offers and by pricing the home either at or slighltly under what may considered “market value”.

Here are a few tips to remember should you find yourself in a possible “bidding war”.

Be prepared to provide a strong offer. Get preapproved early. This will help you know how much you qualify for and the seller will most likely require a strong preapproval letter that illustrates you are strongly qualified and that your loan will successfully close.

Determine your financial boundaries.  What is the most you want to pay for the home and for your monthly mortgage payment?  Bidding wars can be charged with emotion – keep your financial goals in mind. 

I often will provide several preapproval letters at staggered amounts for clients when they’re getting ready to make an offer. The letters might start at their preferred offer price and go up to the limit of their financial comfort zone is (of course they have to for that amount).

Work with a reputable lender. It is not unusual for listing agents to contact the mortgage originator to confirm the preapproval letter and to do a “sniff test” of your mortgage originator. If the listing agent is comparing two offers that are essentially the same, the mortgage originator may be a deciding factor.

Consider a shorter time period for closing. Depending on the seller’s situation, for example if the home is vacant, a shorter closing might help you win the bid. Contact your mortgage originator to see what time frame they can realistically close a transaction before writing an offer for a quick close.

Don’t forget the appraisal. Regardless of what you and five other bidders are willing to pay for a home, it still needs to appraise based on what other homes like have recently sold and closed for.  The seller does not have to accept a lower appraised value. Your lender will rely on the lower of the appraised value or sales price for your mortgage scenario.

Making a non-contingent offer.  Sometimes a real estate agent may suggest that you need to make an offer “non-contingent”. Consider how much earnest money you’re willing to lose if something happens where you elect not to proceed with your transaction (for example, if your appraisal comes in lower than the sales price and you’ve waived your financing contingency). NOTE: making an offer non-contingent on financing may be less risky depending on your personal scenario. 

Be prepared to do your home inspection prior to making an offer. It’s not unusal for greater Seattle area homes that are preparing a bidding war to request inspections be done prior to your offer. This will also help you make your offer “less contingent” it’s not subject to an inspection.

Being as prepared as possible may help give you an advantage over other offers. The sellers and listing agent wants to be assured that what ever transaction they select in a multiple offer situation has the best odds of successfully closing. 

I am happy to assist you with your preapproval and financing of your next home located anywhere in Washington state. I have been originating mortgages, including conventional, FHA and VA at family owned and operated Mortgage Master Service Corporation since April 2000. We are a well respected correspondent lender established in 1976 by the Porter family.  

Reader Question: Does Getting a Mortgage Preapproval Impact my Credit Score?

One of my Seattle subscribers wrote me to ask this great question:  

“I’m considering purchasing a home soon, but I’m concerned about getting preapproved too early.  If I get preapproved and don’t find a home until the preapproval expires and I need a new one, will the credit hit from the first approval damage the score of my second approval?”

Credit scoring is intended to reflect a persons credit habits. When a credit report is pulled by a mortgage originator, a persons score may go down a few points. The initial pull of your credit report will help determine if there’s anything that needs to be address to help improve your scenario before you find your next home. It’s not uncommon to find that your score may be lower than what you estimated, perhaps there’s a parking ticket, or or a payment was reported late that you’re not aware of. This is the time to find out.

Loan preapprovals generally last around 90 days (this may vary depending on how old your supporting documentation is that was provided to validate your preapproval). Your credit report may not need to be repulled until you have a bona fide offer if at all depending on when your transaction is scheduled for closing.  Sometimes a “second preapproval” can be updated with new paystubs or bank statements.

Credit scoring is accumulative. So if you’ve been shopping for a car or a big screen television, these inquiries compounded with one from your mortgage lender will have more of an impact than just the credit being pulled for a preapproval alone.  By the way, if you’re shopping for new credit before (or during) being preapproved for a new home, be ready to explain every one of your credit inquiries. 

Odds are, if you’re worried about your score dipping from being preapproved you really should proceed with having it pulled by a local, licensed mortgage originator now…just in case a little elbow grease can help pump up your scores. Something as simple as paying down a debt to be under 50 or 30 percent of the total credit line may make a difference for an improved mortgage rate or qualifying for certain mortgage program.

I tend to lean towards getting preapproved as soon as possible. At the very least, it’s an opportunity to develop a game plan to make sure you’re in the best position possible for qualifying for your next mortgage. In addition, I’m seeing more non-distressed home homes in the greater Seattle area that are having multiple offers or “bidding wars”. If you’re considering buying a home, you’re going to need to be prepared with a preapproval letter from a reputable lender. You never know when a home that you want to make an offer on may become available.

If you’re considering buying a home in Seattle, Redmond, Walla Walla or anywhere in Washington, I’m happy to help you with your mortgage preapproval. 

Buying a Vacation Home in Washington

WPointless Jones Island Aug 2014ashington State has so many great areas for folks to vacation in.  From the deserts in eastern Washington, rugged mountains, the Pacific coastline or the San Juan Islands; I think our state pretty much has it all to offer. It’s no wonder I’m seeing more clients taking advantage of lower home prices and interest rates to buy a second home.

Mortgage rates are essentially the same for a second home as they would be for a primary residence.  Here are some requirements lenders have for financing an vacation (or second) home:

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What Do You Need for a Preapproval?

preapprovalIf you’re considering buying a home, many real estate agents and/or sellers will require a preapproval letter. A preapproval letter is different than being “prequalified”. Being prequalifed means that you have provided verbal information to a mortgage originator to get an idea of what you qualify for. Being preapproved means that you are providing documentation that supports the information you have provided. Income, employment, assets and credit are verified for a preapproval.

Some preapproval letters aren’t worth the paper they’re written on. Especially if the mortgage originator you’re working with does not require supporting documentation before preparing the letter. If you have not provided supporting documentation (listed below) to your mortgage originator – you’re probably just prequalified and not actually preapproved.

Here is a list of documents you may be required to provide in order to obtain a preapproval:

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What’s the difference between Fannie Mae Homepath and Freddie Mac Homesteps?

EDITORS NOTE: Fannie Mae is no longer offering the FannieMae HomePath mortgage program. If you are considering buying a Fannie Mae HomePath property (foreclosure that is owned by Fannie Mae) in Washington state, I’m happy to help you.

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