Mortgage pre-approvals in retrospect are only rate guarantee’s. When you submit an application for a pre-approval you have not provided any documentation to verify that your information is accurate and you have not even chosen the property you want to borrow against.
Pre-approvals should really be called rate hold’s because there major benefit is getting a rate hold for up to 120 days and not a guarantee of approval. We have all had examples where a client states they have a pre-approval and are ready to purchase. The realtor takes their time and efforts showing clients homes, an offer is put in and low and behold client is declined for the mortgage. So what happened. Basically only 4 things effect a client getting a mortgage. They are income, down payment, credit and property itself (there is no real control regarding the property though).
Every one should get a pre-approval to ensure they are getting the best rates at the time BUT they should go one more step. The client needs to sit down with a professional who deals with mortgage financing only. As a broker I will check the credit, confirm the income and also verify where the down payment is coming from and get proof of such. With this information we can increase the chance of approval that much more and avoid any problems once the client finds a home and puts in an offer. Also as a broker we have access to a multitude of lenders which increases the odds of a final approval and the best deal for the client. So the client gets the best deal and service available and at no charge. (I do not charge broker fee’s for residential deals).
So the next time a client tells you they have a pre-approval you need to ask them questions. Did the lender pull the credit? Did the lender verify income? Did the lender verify down payment? If the client can answer YES to all 3 then happy selling. If they cannot answer YES then you need to direct them to someone who will do the job correctly. The end result will be a sale and a happy client who will refer others towards your services.
Eric Gall is a mortgage specialist for TMG -Atlantic. If you are purchasing, refinancing or renewing your mortgage contact Eric at [email protected] or visit http://avantimortgages.ca/