How Can Agents Avoid Buyer's Loan Problems at the Last Minute?
This post is inspired by a recent blog about last minute conditions and delays by underwriters.
So how can real estate agents (mostly) avoid buyer's loan problems at the las minute? The answer is, it depends on what problem crops up: (1) problems since the preapproval, or (2) problems that existed at the time the client got a loan preapproval.
1. Problems that pop up for the client in between the loan preapproval and the close of escrow, COE:
- A collection hits the credit report; credit is now pulled both at the beginning of the loan process and right at the end just before loan docs are drawn, so this can cause delays as the loan officer hopefully works with the client to get the collection resolved and the credit report "rapid-rescored."
- Client chooses to work fewer hours than their pattern in the past (example: a client was a substitute teacher who "passed" on starting back to her full time substitute teacher position for a full 6 weeks, tanking her monthly income),
- Client is cut back on hours by their employer,
- Client buys a car or other big ticket item...
These problems do cause delay and, in the case of job cut-backs or layoffs, aren't solveable. For the ones that "just" cause delay, an experienced loan officer can usually get them resolved "quickly." In the case of a collection, it can take 48 hours to 30 days to get a letter stating the item is at a zero balance without language such as, "we'll consider your account settled when funds clear." This is fuel for a whole blog post on its own.
We give our clients the "10 Commandments" - a funny but true list of things to do and not do when applying for a real estate loan - basically, keep paying your debts timely and don't buy anything on credit. It helps for the real estate agent and loan officer to remind the client.
Of course, job losses, etc., that are out of the client's control are still going to happen.
Let's move on to:
2. A problem that the client has with the scenario from the get-go:
- Something on the tax returns (deductions to income or failure to claim the rent from an income property as income, etc.),
- Problem with debt to income ratio,
- Problem on the credit report - a collection hitting actively or a credit line with a balance too high,
- Deposits of cash into or out of bank account...
All of these should be caught by a full analysis of the client's documents up front. Use a loan officer who gets the client's permission to pull credit, as well as gathers those items (paystubs, W2s, tax returns, bank statements) up front from the client, works up the entire file and sees, yes, this client qualifies. That's how we do preapprovals at PRW Lending. This gives the seller, real estate agent and, importantly, the clients themselves the confidence that they do indeed qualify to purchase the home.
If anyone wants a copy of the 10 Commandments, please just email me. And please visit our website for lots more local information about homes near Camp Pendleton: www.SandToSeaProperties.com. Thanks!
Lisa Delzompo (951-704-4559)
"May your home always be too small ... to hold all your friends!"
CA Dept of Real Estate, Real Estate Broker License #01379811;
NMLS Identifer #331744
REAL ESTATE: www.SandToSeaProperties.com. Covering northern San Diego, Oceanside, Temecula, Murrieta, Riverside County and desert areas of Yucca Valley, Joshua Tree and Twentynine Palms, CA.
LOANS: PRW Lending, Inc. Call direct 951-704-4559, or email me at lisa(@)sand2sea.us
Information is deemed reliable but is not guaranteed. Information is general and may not address your particular situation. Do not rely solely on this or any information you find on the internet. You should consult relevant professionals directly about your real estate, financial, etc., situation.