Cross Qualification is now a Sin in Real Estate

    real estate advice regarding lendingSin 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 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 2014 and 2015 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 2014, 2015 and 2016 (soon 2017) (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 sellers 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.

    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 vette 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 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.

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    Connor MacIvor

    Top REMAX Realtors in the Santa Clarita - Valencia and Greater Los Angeles areas. Local Real estate agents specializing in buyer and seller consultation and representation.

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