Cross Qualification is now a Sin in Real Estate

    real estate advice regarding lendingUpdate Below: October 1, 2018

    Latest Santa Clarita market report

    Sin is not too harsh when you are talking about the legal world ascending like vultures with razor blades for teeth when a Realtor requests a home buyer to double app with their seller’s lender just to make sure that buyer is “really” qualified.

    Let me unpack this. Lately, there has been a concern raised due to the process of “vetting” a real estate buyer’s lender. One where the real estate buyer was given a pre-approval/qualification letter in accordance with an offer which they submitted on a home for sale.

    In a perfect world, a pre-approval/qualification should be worth something. Where the real estate lender did all of the proper investigation related to the buyer(s). The lender should have asked for the following documentation:

    1. Please sign and return the borrower’s authorization, (typically attached).

    2. Please send a copy of your last 30 days pay stubs.

    –        If you received overtime, commissions or bonuses, it would be helpful if you can provide the year-end pay stubs for December 2015 and 2016.   (this would allow us to average those types of income)

    1. Please send a copy of your 2016 and 2017 Federal tax returns. (1040’s with all attachments, schedules and pages). We will need 2016 as well if completed.
    2. Please send a copy of your 2015, 2016 and 2017 (soon 2018) (three years worth) W2’s.
    3. Please send a copy of your last 2 month’s bank statements for your checking and savings accounts and any account that shows reserves, all pages.  (if the statement shows 1 of 6 pages, we need all 6 pages)
    4. Please send a copy of your current mortgage statements (1st and 2nd if you have one), copy of hazard insurance statement, HOA statement and property tax bill. (we need to show all debts for your current property)
    5. Please send of copy of your Driver’s License and Social Security card.
    6. Please provide a copy of your form DD 214.
    7. We will need your current work address and phone number for employment verification.

    –        Please provide the dates with employer and position.

    These are the items which are required to do a proper loan approval.

    After the documentation is obtained, then it is compiled, double checked for accuracy and then entered into a computer system in total for approval (automated loan approval).

    This process can take a few days to complete in the right way.

    Would you believe this world is not perfect and some lenders get a few figures over the phone from the borrower (the buyer) and generate a pre approval letter?

    It happens way too often and to help those transactions from not falling out of escrow, we had our lender communicate with the borrower’s lender to make sure they are really qualified. Of course, this is how Paris and I did it. We did not want any appearance of evil. Sometimes, we had been aware of a real estate lender, during the cross qualification process, attempt to “steal the client” from their lender.

    That happened way too often also. We always educated our home buyers to this potentially happening if the listing agent insisted the borrower (buyer) communicate directly with their lender. Where the with the borrower’s current lender was purposely to be left out of the cross qualification process.

    Apparently, the lenders who were predatory in nature were using the “cross qualification” system to manipulate the home buyers. Saying things like the listing agent would “make the deal certain” if they were to change lenders to the listing agents. There were a lot of other scenarios which came down the pike related to this, thereby – the powers that be said: “enough is enough!”

    The cross qualification process, when done correctly, worked great for our home sellers. We had very few deals fall apart due to the improper qualification by a real estate lender. In fact, the last reason why a deal would fall apart, to our seller’s happiness, was because a ball was dropped pertaining to the qualification process.

    Today, in real estate, we have to take the lenders word for it. However, there is nothing preventing me and my Santa Clarita real estate team from crawling down the buyer’s lender’s throat with a microscope in hand, to ask the right questions.

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    I’m glad that we have a couple of our real estate team members who used to work in the lending profession. They are great to utilize for our Santa Clarita real estate home sellers to vet the real estate buyers lender. If the lender has not done their due diligence it’s pointed out in an email to all parties. Truth be told, this action seems a bit more embarrassing than the previous cross qualification process where we had our lender speak directly to the home buyer’s lender, keeping the home buyer further than arm’s length from our lender.

    I guess that not all people in the real estate business, the lending world etc, can play fairly and ruin it for the rest of us.

    These new rules will cause more real estate transactions to fall out of escrow due to faulty financing due to the lacking investigation of some home buyers real estate lenders. While the seller seems to be the primary victim in this process, the home buyer is also a victim as well.

    I’m Connor with Honor at REMAX of Santa Clarita. This is our local REMAX of Santa Clarita City Map – Enjoy our processes and our SCVblog.com where we write the content which our home buyers and sellers find very important pertaining to the home buying process. I’m here for you at all times and when you are ready please reach out to us and we will take great care of you.

    Update for Cross Qualifying being a sin – New Housing

    If you have given us time to have read this article, I’m completely honored. This is my update concerning new housing and the new home builders demanding cross qualification related to the sales of their homes.

    This is still a regular occurrence. When a buyer approaches a new home builder, it’s typical that the new home builder has a Preferred real estate lender, who is going to double check them being approved.

    Some of the new home builders are those who don’t have an assigned lender. These are more the exception than the rule for sure. In fact, I always do a double take when I’m at a new home center with a client and the response to my question, “who is the new home builder’s preferred lender?” gets a “they don’t have one, your buyer can use whomever they want!” response – It’s so rare, its Earth-shattering.

    It’s like when I was a motor cop for the LAPD. To pull someone over and have them admit to the reason why I have a violation against them was so rare, those who did never received a citation from me. There were enough people who denied it, even though the violation was on video and I had the time and date stamp, they still denied it. But to have one honest person out of 20, that deserved forgiveness.

    Back to the new home lenders and new construction websites. I have seen that most of them do have the lenders which they refer business to. This is not a problem and they must have some work around mechanism so it is not a violation of the rules. However, if a person pushed, they may be able to have this circumvented and not done without it being a violation of the new home builder policy.

    One way the new home builder gets around it is by having the interested buyer sign a disclaimer/disclosure that mandates their agreement to having their complete credit profile verified by the new home builder’s lender. Once they agree, it is no longer a violation. The new home buyer is a captive audience. They are in the new home builder’s office with their own agent, hopefully, and they get presented with this disclaimer to have to qualify with the new home builder’s lender. They want to buy the new home, they see other people coming in and out of the new home office, and they agree out of pressure or ignorance.

    You may be thinking what is the issue? Having a complete second credit inquiry could harm your fico score. Your fico score is how any lender is going to size you up. It’s one of the determining factors as to whether you are going to get a loan or not and if approved what your interest rate will be. If your credit report is run multiple times, the fico score goes down. Most times, this is able to be fixed by something called a rapid rescore. It’s a mechanism used by a real estate lender to tighten up the score and remove the inquiry penalty if it can be justified. However, why take the risk?

    To move around this procedure with the new home builder communities may fall on deaf ears. You can try, and if there is a relationship between your agent and the new home builder agent, it may work. If they don’t know your agent from Adam, or if you are not enforcing your right to have your own agent and end up using the new home builder’s agent, no chance.

    Something else worth mentioning related to running credit and already having a real estate lender. The Cross Qualification started becoming very popular again when we were working for the major banks with the sale of their foreclosure assets. The Real Estate Owned and Bank Owned property owners were demanding cross qualification, not with themselves due to a conflict of interest, but with a sister entity. Of course, as with the new housing lenders, these “sister entity lenders” wanted to make the buyer being qualified theirs.  That’s is the game, of course.

    To be fair, some lenders can give better deals than other lenders. Why wouldn’t any home buyer want that? If they can get it done, if there are no “extra or hidden fees”, and if there are more discounts, better interest rates or extra incentives in using them, have at it. It is a competition as is real estate.

    Just make sure they are indeed your best deal. I always ask for my new home clients what the “incentives” in using the new home builder’s preferred lender are. They usually have something. In some cases, the new home lender paying the clients’ closing costs, was not a better deal than the lender I referred them to due to a much lower interest rate. Penciled out over time, the savings pertaining to the new home lender’s closing cost credit would have been exhausted in three years of our buyers living in the home.

    I have a series of questions I ask the new home builder’s representative in the presence of my new home clients. I want to know about any mello roos tax, how much, can they be increased, and when they end – and what happens when they end and if the recipients don’t want them to end.

    I want to know what the cost increases were, how often and how much per model of the home being sold since inception and original groundbreaking at the new Santa Clarita home builder communities.

    It’s important to know and I’m one that needs my clients to be informed. When approaching new housing with my new home buyers, I get to the bottom of what they need to know, without knowing what they should be asking. I’m their negotiator, I’m their confidant, I’m their new home realtor.

    Be safe, thanks for reading this update to one of our most visited real estate blog article. I will be here when you are ready and I will always represent you to the best of my ability!

    Working with the BEST Santa Clarita lenders

    I have been directly representing those who are buying and selling real estate since 1998. During that time I will tell you that some who have brought their own lenders to the table have been “almost” taken advantage of. When I see that their lender’s numbers are not making sense, I call them out. Sorry – that is how we keep our clients close to us. It’s not like they won’t find out that they were screwed with regard to their home loan.

    They will find out sooner or later and what will that lender do? Will they have left the county fleeing to Argentina because no one has thought of that before? Maybe they make a practice of taking advantage of people that are borrowing money to buy real estate? Heck, there maybe ways to hide extra loan commissions with a loan consisting of hundreds of thousands of dollars.

    The point is, as I have stated, not all real estate lenders are created equal. There are bad lenders, okay lenders and those who have the best deals combined with the best real estate service in the Santa Clarita Valley cities.

    I work with the best of the best. When I first meet with my clients I give them the best questions to ask the lender I’m referring them to or the one they are currently using to see if that lender has their best interest at heart. If that lender is giving them truly the best deal on the home loan, as they are stating. I give our real estate and home buyer clients what they need to ensure they are going to be well protected on the lending side of the real estate transaction.

    Most lenders that don’t know us and how I operate my Santa Clarita real estate team dislike this. When those clients that I have educated start asking them the questions, they are not too happy and in some cases, they choose not to move forward with the financing. This is because it’s going to be too difficult to deal with an educated home buyer.

    The lenders that I refer my clients to, they know the source of the educated home buyer and they do answer their questions without issue. They are always there to serve as I am on this end to serve my Santa Clarita real estate home buyers and sellers needs.

    The following advice goes to those of you that are also wanting to conduct a refinance of your home loan. I refer to the best lenders who handle Santa Clarita Valley refinances in their lending business.

    Veterans Administration home loans( VA ) – Federal housing administration home loans (FHA)  – Conventional Loans and the other “income restricted” grant and benefit home loan programs also.

    Contact me and I’ll be sure you are well taken care of

    Jason Ellis

    Contact Me Now

    Any questions, comments, or feedback

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    Paris and Connor MacIvor

    Connor and Paris MacIvor are in the Top 1% of Realtors Nationwide, starting their real estate business in 1998 with RE/MAX Gateway - Santa Clarita Valley and Valencia CA. Their becoming licensed real estate consultants and representatives came from the horrible experience they had when they bought their first home. There were many things that the agent they had hired did not explain and disclose, which per law he should have. Getting that agent on the phone after they closed escrow and after he had gotten paid was impossible. Paris and Connor called the broker, the board of realtors, the office manager and all they received was the promise of a phone call back. The remedy did come, but not as fast and in the way they wanted. That act - that bad agent was the reason why Paris and Connor became Realtors. That was all they needed to vow to never let the same fate befall anyone else, that befell them. Today Connor and Paris are focused on client service. Protection and top-shelf service with regard to their real estate clientele. They primarily work within the Santa Clarita Valley and Valencia CA. However, for a referral, where 80+ of their business is referrals they have License and Will Travel to other parts of Ventura County, Los Angeles County, and Orange County to handle real estate transactions for those who trust their real estate operation. Writing on their Real Estate Blog is a passion. SCVnest.com/blog is where you will find over 10,000 real estate articles. Go to SCVnest.com/radio to listen to their latest real estate radio broadcast.

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    Jason Ellis

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