A NJ Mortgage Company Take on Being Pre Approved in a Competative Market
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At Jersey Mortgage Company we know the jargon in the Home buying business can get quite confusing. Not to worry, we are here to help! We have found some recent news to help educate home buyers currently in the market. You do not need to know all the ins and outs of mortgages and properties to get the home of your deams. That is what were here for! See what one of our senior loan officers had to say in a recent post in the NY Times. Contact your New Jersey Mortgage Company today for more details on mortgage options or prepare by calculating your mortgage today!Promoting Mortgage Preapprovals in Competitive Markets
Source: NY Times
Smaller lenders are using preapprovals to attract borrowers in markets where competition for homes is fierce.
A preapproval is a written confirmation of the maximum loan amount for which a borrower qualifies, along with the likely interest rate, and shows sellers that a buyer has the financing to back up an offer. While not a firm commitment to lend, a preapproval offers more certainty than the less formal prequalification because it is based on the borrower’s income and assets, as well as a credit check.
“When I get two offers on a property, there is different weight given to a preapproval” compared with a prequalification, said Vanessa Pollock, an agent with Keller Williams Midtown Direct Realty, in Maplewood, N.J.
Times Topic: Mortgages
Many large lenders offer only the less labor-intensive prequalification. TD Bank, for example, does not do preapprovals. Instead, the lender promises to give borrowers a conditional financing decision within 24 hours after they submit an application for a mortgage, said Malcolm Hollensteiner, the bank’s director of retail lending products and services.
“So the buyer and seller know within 24 hours that the only thing left in the process is the appraisal report,” he said.
But with refinancing activity way down, and purchase applications lagging behind expectations, some smaller lenders are offering preapprovals to get an edge on the competition early in the process. And in areas where inventory is low, buyer demand for preapprovals is high.
At NEFCU, a 160,000-member credit union on Long Island, preapprovals currently represent 57 percent of all requests received, up from 27 percent this time last year, according to Charles Price, the vice president of lending. This increase has not yet translated into an equal rise in purchase applications, which could mean that borrowers are seeking multiple preapprovals, he said, “trying to get as many irons in the fire as they can” so they can find the best deal. While interest rates on a 30-year fixed-rate loan are still hovering just above 4 percent, “people got locked into what interest-rate pricing used to be,” he said, “and now they have this unrealistic sense that rates are high.”
High preapproval volume relative to purchase applications may also mean that borrowers who have been successfully preapproved are losing in bidding wars, and therefore not following through, Mr. Hollensteiner said. “Historically, for every four preapprovals, one or two borrowers would buy and finance through that lender,” he said. “Today, it might be one out of every six or seven, because buyers aren’t successful with their bids.”
Preapproval volume is up at least 50 percent this year at First Choice Loan Services, in Morganville, N.J., according to Norman T. Koenigsberg, the company president. He also attributes the growth in demand to the limited inventory of homes for sale, which allows sellers to be more selective about offers. And more real estate agents are using preapprovals as leverage when presenting offers from clients.
“It essentially affords borrowers the ability to shop as a cash buyer,” Mr. Koenigsberg said.
Justin Messing, a senior loan officer with the Jersey Mortgage Company, said all the real estate agents he works with want their clients to be preapproved. He said he tries to be as thorough as possible when considering a borrower for preapproval, going beyond the usual income and assets analysis to ask questions about areas that could derail the loan at application time, such as unacknowledged alimony or child support commitments.
“I almost do a little mini-underwrite,” he said, “because I want to make sure my loans close.”
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