On-Line Approval = Uh Oh!
It’s so easy to fill in a few fields and click a few buttons and shazam, have a home loan pre-approval. After all, the largest home lender in America makes loans simple! And you can get a low rate home loan in as little as 20 minutes at other places. But how well do those loan pre-approvals hold up?
Sometimes they don’t.
The caller told me he had been pre-approved to buy a $275,000 house using an on-line lender. We did the usual conversation about the details of what he wanted to do, how long he had been at his job, what his income was. All very cut and dried. Until, that is, I asked about income from prior years. “Oh, I didn’t make as much. Business is really great now.” What that meant in numbers is that his year-to-date earnings were double his entire prior year. That’s a huge jump.
After the mortgage crisis, Congress got pretty excited about Ability To Repay. We’re required to verify income from several different sources to make sure the number is vetted. And, there is quite a bit of emphasis on “will this income continue, in order to repay our loan?”
When income has jumped so recently, we don’t know if the level of pay will be sustained going forward. What that means in real life is, we can’t use it to qualify.
Taking the entire scenario into account, that $275,000 on-line pre-approval turned into a barely-squeaking-by $150,000 loan. And of course, that changed everything.
Point being, click all you want, but when you need to be absolutely certain your mortgage will close as promised, count on a local professional for your loan pre-approval. We have a talented, experienced community of lenders, and our reputations preclude us from promising things we can’t deliver.
Tammy Engel is your local Mortgage Advisor. She’s been working for your best interest since 1990, and can be reached at 661/822-7325 for your purchase, refinance, and reverse mortgage needs/ NMLS #235051 CalDRE #01273839