to “save the day.”
In many cases, there was a situation where a Realtor had abuyer come to them who was “already pre-approved.” Their friend, cousin,
former coworker, etc. worked part time for a mortgage broker and they wanted to go
through them on the loan. Not wanting to sound pushy, the agent hesitates to reccomend they go through their trusted lender and gives “their lo” a chance. After attempting to broker the loan and killing
valuable weeks from a 30 day escrow, the borrower calls their agent and lets
them know their lender couldn’t get the job done.
In the past this was an opportunity for a professional lender to “save the
deal,” review the file, properly qualify the borrower within the guidelines and make a sprint to the finish line to fund the loan, while closing quickly enough to save the escrow. This isn’t the case anymore.
- With the new 2010 Good Faith Estimate laws, there are several points in the loan process that now require certain steps that have certain extended timeframes.
- More importantly, FHA has begun to say they will NOT insure mortgages that were previously declined by another lender.
- Every FHA loan that is submitted and appraised is registered in what is called “FHA connection.” They are assigned a unique case # and the property address is matched with their social security number.
- If an underwriter makes a note in the FHA Connection system and states in the file that “credit was denied” then that borrower is now essentially blocked from being able to get an FHA loan on that property.
- This is the case, EVEN IF they really did qualify and just had a unprofessional loan officer submit a disaster of a loan package to their wholesale lender of choice, or was unaware of that wholesale lenders guidelines that supersede the FHA guidelines.
What to do if a buyer is caught in this situation?
- Do not panic! Although this situation could have been prevented with a thorough interview of the lender by the buyers agent, when is NOW a good time to start?
- After interviewing the lender and getting an accurate assesment of whether or not things will work out, make a judgment call and decide what decision will give the buyer the best chance of closing on their dream home.
- The market is not so easy to get into in California’s high demand markets, the last thing anyone wants to deal with is mid-escrow financing issues, get it right the first time… do your homework and interview the lender!
If you or a buyer you know is not feeling confident in their lenders ability
to get the job done, do everyone a favor and make sure they find a legitimate
lender who knows what they are doing. If things are really going sideways and the mortgage stands to get denied due to a poor loan submission CANCEL (if another lender is sure they can fund it) before the other lender’s underwriter does any permanent damage on their ability to get an FHA loan! If the buyer cancels, and another lender can do the loan everyone still has hope. However, if an underwriter makes a note in the FHA system “credit denied.” Say bye to the property/or buyer.
The solution is for buyers and agents to make sure that the right lender is
financing the purchase from day 1. As a buyer, make sure that you are
working with a reputable lender and ask for proof of success on previous
escrows. As an agent, it is the same idea: Are you trusting your buyer’s
ability to finance the biggest purchase of their life with their friends
cousins sisters boyfriend? Make sure that now more then ever you have a “go
to” relationship established with a good lender at a good company. Agents,
in this real estate environment you can’t afford to take risks with your
buyers (and the buyers of your seller’s homes!)
-Rafael Perez
Questions? I can be reached at Rafael@thehomemap.com