Lenders on Fast Track to Cover Their Potential Future Losses

We all know the difference between a lender pre-qualification and a lender pre-approval letter and yet traditionally you don’t have solid financing until you have formal loan approval.  During the past few months lenders have been changing their underwriting guidelines so fast that a solid pre-approval letter may become as worthless as the paper it is written on and, as a buyer,  you may find yourself unable to finance your purchase. 

What does this mean if you’re a Buyer?  Simply put; after completing all the hoops your lender required to get a pre-approval letter you enter into a contract in good faith, then two or three weeks into the contract the lender changes the rules for getting a loan. If you are lucky you skate by but if you are marginal in any one of the underwriting changes that take place you find yourself in a contract unable to perform due to the fact you no longer can get a loan.  Now you find yourself out the cost of a home inspection and possible the cost of an appraisal as well.  In the Victorville CA area the majority of sales are bank owned properties and many of the banks/asset management companies will not return your deposit after 5-7 days into the contract regardless of loan contingency clauses (odd… the same bank changing the rules may be the same bank keeping your deposit). The caveat here is to be very cautious about your contract and all contingency clauses are written or you may find yourself well into a real estate contract and find your lender changing the rules on you.  We find may buyers today electing in a very conscious manner not to buy up to the maximum they can qualify for and insuring they will have adequate reserves… now that’s smart thinking.

Here’s “One for the Books: Like most American’s today I have lots I’d like to say about the economy and what’s going on.  Here’s “One for the Books” is a weekly article focusing on real estate related article about industry changes, blunders, screw ups and unbelievable actions all worth a laugh or just a shaking of your head. Check in weekly for the latest news/opinions.  If you have “One for the Books” be sure and let us know so we can publish it for you.

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