I'm Pre-Approved - What Can Go Wrong?

By
Real Estate Agent with Classic Realty Realtor

I'm Pre-Approved - What Can Go Wrong?

A recent client, while touring homes, asked me a simple question
:
"
What is the number 1 thing you've experienced that most often goes wrong in a Real Estate Transaction, after you have a contract?" While other Real Estate agents might come up with a different response, mine is a NO Brainer.

The clients have their pre-approval for a Mortgage, their credit is run again for one last time just before closing and a problem surfaces. The problem? The pre-approved clients have gone out and made some kind of a major purchase on credit. Most often, it is for furniture for the new house, flooring, window treatments and/or a host of other possibilities. As a result, their Credit Score has been affected and now, being able to secure a Mortgage is in serious jeopardy and/or the Mortgage Loan falls through. 

What is the rule here?
Once you have your pre-approval, 
just say, "NO" to the temptation of buying on credit or the unnecessary spending of cash!

Do not buy on credit before you close on the house. Do NOT spend unnecessary cash out of your various savings/checking accounts. This is especially true if your Credit Score is sitting right on the border of "Just making it" so as to secure a loan, or you have just enough cash to close. This is TRULY what is REAL about Real Estate. 


Finally, remember that knowledge can be power when endeavoring to buy or sell Real Estate. If I can help you in this process, please contact me by phone/text/email

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. John McCormack 07/15/2012 09:29 PM
Topic:
Home Buying
Location:
Virginia
Tags:
fairfax mls
haymarket mls
haymarket homes for sale
fairfax homes for sale
credit
preapproved

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Rainmaker
223,321
Pamela Smith
Long Realty West Valley - Sun City West, AZ
Sun City West, Corte Bella, Sun City Grand

David,

I don't think we can say this enought to clients . . . but do they listen?

Jul 16, 2012 08:30 AM #14
Rainmaker
712,030
Gene Mundt, Chicago-area Mortgage Lender - www.genemundt.com
NMLS #216987 - New Lenox, IL
708.921.6331 - 37 yrs experience

Amen, David!  And as a mortgage lender, I think this very important .. vitaL information cannot be stated often enough of loudly enough.  Thanks for passing the info on ... hopefully new buyers are watching ...

Gene

Jul 16, 2012 08:30 AM #15
Rainer
53,462
Tom Jarzynka
Axia Home Loans & Real Estate Investment Firm - Seattle, WA

Agreed.

Jul 16, 2012 09:11 AM #16
Rainmaker
652,773
Bob & Carolin Benjamin
Benjamin Realty LLC - Gold Canyon, AZ
East Phoenix Arizona Homes

Seems no matter how often one says this there are still times they do not listen and then live to regret not listening.

Jul 16, 2012 09:13 AM #17
Rainmaker
72,329
zeta cross
Smart Green Realty - Philadelphia, PA
Getting to Green, making older houses energy effic

This is a tear-jerker. It still pains me. My client worked hard her whole life as a nurse's aide. The low-paying job with night-shift hours is always in demand. In anticipation of her move to her first modest house, she quit her job the week before settlement. Her financing was based on income and her usual overtime. Even though she was able to get another job in one day, she could not longer qualify because she lost her overtime history.

Jul 16, 2012 09:59 AM #18
Rainmaker
72,329
zeta cross
Smart Green Realty - Philadelphia, PA
Getting to Green, making older houses energy effic

Another sad memory: The fiance bought his wife-to-be an expensive engagement ring a couple weeks before settlement. Tearful closing as he hustled to dump money from his 401k and beg, borrow the rest from parents. Awful memory. He was able to the day though.

Jul 16, 2012 10:01 AM #19
Rainmaker
430,598
Adam Brett
The Adam and Eric Team - Fullerton, CA
The Adam and Eric Team, Setting the New Standard

Talk about great and valuable content! Thanks for putting this together David!

Jul 16, 2012 10:11 AM #20
Rainmaker
263,393
Rob Spinosa
RPM Mortgage, Marin County, CA - Mill Valley, CA
Marin Mortgage Broker

About the only advice that seems to resonate is to tell my clients to call me if they plan to do anything that would touch their credit rating.  I haven't had as good luck with explaining large purchases, inquiries, etc.  I'm not sure they get it.  So I just say, "Call me before you do anything out of the ordinary regarding credit."  And I've gotten a few calls and prevented a few mishaps. 

The system is rigged to catch everything --- but mostly the little things.  It's our job to protect our clients from it.

Great post.

Jul 16, 2012 10:28 AM #21
Rainmaker
142,826
Greg Miller
Ruoff Home Mortgage - Warsaw, IN
Warsaw Ind. Home Loans - Conventional,FHA,USDA,VA

Great advice David, Oh let me count the ways that I have seen this at the last minute. My worst memory is a couple that bought a whole house of furniture on "90 Days as a cash". This new debt threw them out of acceptable ratios and they didn't close but had a truck full of furniture.90 days same as cash is NOT the same as cash!!!

Jul 16, 2012 10:35 AM #22
Rainmaker
72,834
Tiffany Sniezek
RE/MAX The Woodlands & Spring, TX 713-594-9639 direct, - The Woodlands, TX
Tiffany Sniezek 713-594-9639 RE/MAX Woodlands TX

So true! I definitely tell clients, "I know you are so excited about your new home. Just dont go out  and try to furnish it.  You might not actually be able to close."  Good reminders and post that it really does matter!

Jul 16, 2012 10:35 AM #23
Ambassador
686,368
Charita Cadenhead
Keller Williams Realty - Birmingham, AL
Serving Jefferson and Shelby Counties (Alabama)

Hallelujaha and Amen to that.

Jul 16, 2012 10:49 AM #24
Rainer
3,143
Kenny Qiu
Tierra Antigua Realty - Tucson, AZ

David, thanks for the post.  What if the buyer loses his/her job right before the closing, how is this going to effect the transaction?  Thanks.

 

Jul 16, 2012 11:22 AM #25
Ambassador
454,560
Paul McFadden
Paratex - Seattle, WA
Janitorial. Kent, WA.

David: Thanks. This is very true. It's funny. I've never had a borrower add credit during their pending purchase. Perhaps they're afraid to due to the huge new debt they'll be incurring. Of course I always remind them not to add debt; perhaps they listen to me as well. Thanks again for the post!

Jul 16, 2012 11:53 AM #26
Rainmaker
532,193
David Burrows
Classic Realty - Fairfax, VA
No Pressure, Just Seriously Devoted to Real Estate

Wow, I was surprised to sign on to Active Rain this evening and find so many responses to my post last evening. To everyone who took time to stop by and share - a BIG Thank you..... I am grateful! Most important, I couldn't help but realize how all agents and loan officers could relate to my post. Again, I am grateful you came by. Thanks

Jul 16, 2012 02:26 PM #27
Rainmaker
266,604
Jay Beckingham
Premier Nationwide Lending - Port St Lucie, FL
"I love first time homebuyers"

pre meaning before. therefore pre-approval, before approval.

the realtor association of ft. myers and the beach offers a homebuyers education course.it is very popular.

for many who desire to acquire the benefits of the florida bond program or other down payment/closing cost assitance programs it is required.

that issue is covered along with others. the potential buyers/new homeowners are much better prepared to own a home.

Jul 16, 2012 02:51 PM #28
Rainmaker
441,860
Kevin Mackessy
Blue Olive Properties, LLC - Highlands Ranch, CO
Dedicated. Qualified. Local.
Excellent advice. Just say no to the temptations.
Jul 16, 2012 03:39 PM #29
Rainer
229,115
Carie Shapiro
Managing Broker-IL; Pre-License Instructor-IL; Broker-TX - Chicago, IL

Good reminder!  No major purchases and no new credit cards either ... even though they offer you an additional 10% off your purchase :)

Jul 16, 2012 03:44 PM #30
Rainmaker
532,193
David Burrows
Classic Realty - Fairfax, VA
No Pressure, Just Seriously Devoted to Real Estate

Thanks Jay for sharing your thoughts... A good educational course in home buying is always a good thing, espcially for first time home buyers.

Kevin, thanks for stopping by and reminding all Home Buyers to resist the temptation to spend.

Carie, you are right, say NO even if they offer some kind of rebate for taking the Credit Card. Thanks for coming by.

Jul 16, 2012 04:30 PM #31
Rainmaker
542,279
Eric Michael
Remerica Integrity, Realtors®, Northville, MI - Livonia, MI
Metro Detroit Real Estate Professional 734.564.1519

David, I've actually been finding a LOT of loan officers aren't telling buyers about this lately. I was showing homes to a guy a few months back, and in our discussions he mentioned that he only had 1 payment left on his car. I told him "that's great, because it will free up some money". He responded, "The day the check clears, I'm going to buy a New car!" We had a long talk right then.

Jul 16, 2012 04:31 PM #32
Rainer
8,017
Jay Taylor
Cre8tive Apps, LLC - Austin, TX
I am a bit surprised that stuff like this happens. When I was buying my home and was pre approved, I would not have even considered such a move. My entire focus was on getting the right house and not doing anything that would create risk. Once in the home , then yes buying a new washer and dryer and refrig were on the list, but not until after keys were in hand.
Jul 16, 2012 10:07 PM #33
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Rainmaker
532,193

David Burrows

No Pressure, Just Seriously Devoted to Real Estate
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