Mortgage Application Declined

What is a declination letter and why is it so devastating to a real estate transaction?

So your buyer tells you that they have been pre-approved for a mortgage loan and they are ready to look at properties.  As the Realtor, you trust the pre-approval letter and put them in your car.  After spending two weekends look at different houses all over the city, burning time, gas, and energy your buyer finally decides on their perfect home and you put it under contract.  You submit the pre-approval letter as part of your offer, so that the sellers will feel comfortable accepting your client’s offer. 

At this point, the lender that provided the pre-approval letter then begins to dig deeper into the specifics of your buyer.  You are all shocked when your buyer receives their declination letter!  This has the potential of affecting the sale of multiple homes, especially if the seller was counting on the sale of their property to be able purchase their next home.

“When you are coming to us at Carolina Mortgage Experts, it is like you are here for a “financially physical”.  What I mean by that is, we are looking for things that the buyer is saying and not saying during their pre-approval interview” said Bert Karrer, Branch Manager of Carolina Mortgage Experts.  “We have been doing this so long that we are asking questions in a way and in an order that the buyer is not even aware of what we are trying to diagnose.  We are not just plugging things into an automated underwriting system and hoping for the best.    You may be able to hide a past foreclosure, bad credit, or break in work history from your Realtor, but you can not hide those issues from your Mortgage Loan Officer.”

Let’s discuss the pre-approval letter.  Does it really matter which lender prepares that letter?  “It matters to us at Carolina Mortgage Experts”, said Bert Karrer.  “My staff are  formerly trained underwriters that are skilled at seeing red flags early on a file”.  “We provide white gloved service to our Realtor Partners, so they can trust that their buyer has been assessed for mortgage potential and the letter will hold”, said Bert Karrer.  There are many lenders out there that may provide a pre-approval letter to customer #876567 and have not even checked the buyer’s credit history, their credit score, or even verified the information provided by the buyer.  To big box lenders, that pre-approval letter may be one of 200 that they provided this week.  Yes, it really does matter where the pre-approval letter comes from.  A pre-approval letter that is not even worth the paper it is printed on could cause major issues that could have been avoided in the beginning of the process before the buyer even got into the Realtor’s car.

Always be wary of a pre-approval letter that has stipulations such as:  subject to credit review, verification of employment or information, and buyer’s financial picture has not been altered in any way.