Jim and Jane are here today, wanting to talk about the difference between pre-qualification letters and pre-approval letters. But before we dive into that, we have noticed a huge change over the years, and we wanted to talk today about instant gratification amongst people today, especially the youth. Instant gratification today with regard to a pre-approval letter is probably a huge mistake. Jim went online and researched before this podcast to see why everyone today is looking for instant gratification and just a few things he wanted to read off.

1) Technology trains the brain for speed. APP, notifications, and social media are rewards for fast interactions. One-click interactions (i.e., Amazon).

2) Modern life is built around conveniences. (i.e., movies load instantly, information is available in seconds, and communication is immediate. It becomes natural to expect everything else in your life to work that same way.

3) Social media sets unrealistic expectations and standards. (i.e., everyone wants quick success, is impatient with slow progress, and has anxiety when results are not immediate. Culture rewards fast results.

Why are these 3 gratification notes good for pre-approval? They are very dangerous for buyers, sellers, lenders, real estate agents, title companies, and everyone that is involved in getting a loan.

Pre-approvals have become increasingly automated and fast; a lot of companies advertise instant decisions, and they are being marketed as customer-friendly. Everyone wants instant gratification.

Pre-qualification letters and pre-approval letters. On a pre-qualification you (loan officer) are not running everything as far as credit to get the pre-qualification. For example, we ask the question “What do you do?” or “What do you make?” or “What do you have?” or type it in on a form and think that is the right answer. A pre-approval is reviewing that pre-qualification document. We start with those 3 questions as an outline to start the process and some pre-approvals and start with reviewing and looking at documentation (i.e., bank statements, paystubs, W2s, divorce decrees, child support, paternity case orders, tax returns, leases for rental properties, and self-employed documents). One of the big misconceptions is that people will apply online and fill out the forms, which is not like a credit card, and they need to be verified.

We have to verify everything, and it can’t always get done quickly. Most times it takes more time to get the documents from our client than it takes for us to review the items. We do our best to remind everyone that this pre-qualification letter is just a “qualification”; it’s not a pre-approval letter. Some might not be aware, but we are obliged to believe what the client tells us is true information. We have no reason to not believe what you are telling us is true, until we receive actual documentation.

There are people out there without “credit review or no credit reports pulled.” We put notes on our pre-approval letters that state “credit and income to remain the same, credit to be pulled, etc.,” which all play a role. Be aware because there are places out there that are giving “pre-approval letters” that don’t even do a credit review or see if you have money down.

Jim just had a buyer that was getting a quote, but prior to working with Real Estate Resource Home Loans they were promising everything to this client, and it looked too good to be true. We found out that they never did a credit pull or asked for a W2, had no idea what their assets and liabilities were, and it was a false sense to get someone a good deal. If they are quoting you a rate, you don’t know about that rate at this point in the process.

There are many people whose pre-approval letter expires; you may want to get with that buyer to get a new pre-approval letter. Anything can happen in that time frame, especially if you can’t find the house of your dreams.

Once you hit different times of the year, different information is asked than what was in the middle of the year. I.E. Self-Employed extensions, etc.

Bank statements—we have to question those companies that extend payments, like Amazon. Amazon can extend payments for you, which then is considered a loan.

We use ChatGPT, and we Google. We find more mistakes on ChatGPT than what happens in real life, so be careful when you are researching on platforms like that.

We have to have a trail on bank statements, especially if you are moving money around. We want you, the real estate agents, and our team to have a smooth transaction. When receiving the documents, and not screenshots, we can review, read and interpret this information. We can then call back with questions; we ask the questions that we are going to get from our underwriters.

So with all of these questions that come up, how do you get “instant gratification” for a pre-approval letter? We don’t see how it can be done. There are so many moving parts.

You need to prepare. You want to get out there to find your home, but to rush that pre-approval process, you need to be ready. But when you find that home, you can call us and we will answer, but for us to issue a “solid pre-approval letter” we need to do a good job for you and do it right. There are sometimes things show up on your credit that you didn’t know about, and we need to address it, so you can get it fixed or get proof that things are being addressed. The biggest ones that we are running into are student loans. Student loans were put into “forbearance”, which is that no one needed to make payments, and they came out of “forbearance” and no one is making payments, or they still have their loans connected to their school emails, which they no longer have access to. Jim had a young borrower, that had all of their mail going to a previous address, and they had no idea that their student loans were going to that address.

I would start opening your envelopes, and we had clients that had perfect credit, but they had found out that they had years of student loans that weren’t being made on time. Everyone thinks that since it is fast and easy, it has to be right. If you get us the items that are needed, and if you could get us the information to use quickly, we can get you a letter right away.

If you could let us know what you can afford in a payment, and you can’t find the house that you were looking for, we can look at that “affordable payment” to see if you can go higher in a house.

Do things come up? Absolutely. We never know what the underwriter is going to look for. So make sure to ask your loan officer questions.

Sign of a really bad loan officer … “Let me pull your credit.” They are not discussing down payment, down payment assistance, income, job bonuses, money in a 401K, etc. And if the credit score is low, they will just tell you that they can’t get you a loan. To just pull credit right away, it is expensive, so we like to see a lot of things before the hard credit report is pulled. We have ways to keep your information secure, to protect your information, just so you know.

Contact a Real Estate Resource Home Loans loan officer today, to talk more about what a pre-approval qualification and pre-approval letter is and what is needed during the process. We only want what is best for you in your home buying journey.