Underwriting does not have to be scary. With the appropriate set-up, no matter the credit score or situation, obtaining a mortgage does not have to be stressful. In fact, at the time of this writing, I have closed 7 loans this year with credit scores below 580.
A client reached out to me regarding a mortgage pre-approval. He desperately wanted to qualify for a purchase. Sadly, two lenders had already turned him down during a purchase transaction, after they had already issued a pre-approval. He was reluctant to begin the process again – to get his hopes up – only to end up disappointed. I explained it would be different this time, but how?
A Broken System
For some clients who have had uncontrollable circumstances in the past that lead to a bruised credit score, they might think they will never be able to qualify to purchase a home. But is hope and home ownership truly out of reach?
Many mortgage bankers have access to VA loan products with no minimum credit score. They also have access to FHA products with a credit score down to 500. So why are so many clients being denied who could fit into this category?
Loan officers are reluctant to issue pre-approvals on riskier files because most lenders wait until a client has an accepted offer to submit to underwriting. An accepted offer is another name for a signed purchase agreement. Real estate is reputation and relationship-based, so loan officers want to ensure their pre-approvals are rock solid. In this circumstance, lenders might deny clients with bruised credit, solely because they do not want to risk damaging their reputation. If a loan officer has to issue a loan denial for a client who is already pre-approved, it causes unnecessary stress for the client, damages the reputation of the lender, and inconveniences the seller who will need to find a new buyer.
What is the solution to this?
What I explained to my new client is the solution that settles all doubt. Why wait to submit a file to underwriting? At CrossCountry Mortgage, I am able to obtain a full underwriting approval before I issue a pre-approval. No matter how risky is the file, we can flip the script and ensure the client is truly approved. This has the following benefits:
- The transaction is expedited because underwriting is complete.
- The client’s offer is stronger because of less risk of denial to the seller.
- The client can close as quickly as 18 days.
After explaining this to my client, he trusted in me to go through the process. Once we secured a full underwriting approval, we were able to help my client close 18 days later.