Q: I am a first-time buyer and although I’m preapproved for my loan, whenever I make an offer the seller counters and asks for a credit history and score. So far, I haven’t handed it over and I haven’t had any of my offers accepted.
What’s going on here? I thought being preapproved meant that I would appear to be a stronger buyer?
A: It sounds to me as though you are not being taken seriously. What I usually advise home buyers to do when they are not being taken seriously is to get pre-approved for their loan, versus prequalified.
When you get preapproved, rather than prequalified, the lender commits in writing to funding your loan provided that the home appraises out in value. Some lenders use the words “preapproved” when they actually mean that you are “prequalified.” A preapproval means that you have applied for a loan and have a final approval subject to finding the right property and having the property appraise out. Appraising out is when the value of the home as determined by the appraiser is at or above the purchase price you have agreed to pay.
One option you have is to have your agent inform the sellers that you are preapproved for your financing and to hand over a copy of the loan commitment letter.
Another option is to simply take the financing contingency out of your offer and instead put in a contingency that requires the home to appraise out in value.
The difference is that your financing is already approved, but if you go in without any financing contingency, you don’t have any protection in case the home doesn’t appraise out and it turns out that you’re buying something whose value can’t be established.
I’m also wondering if there isn’t something wrong with the way your agent is representing your offers. Is she somehow transmitting the idea that you’re not a strong buyer? Does she feel (for whatever reason) that you’re not really committed to buying a home? Is she new to the business and perhaps not accustomed to presenting offers?
You should talk to your agent about how she is presenting the offer and ask her what she is saying. To get the same response over and over again seems strange. If your agent seems unresponsive when you introduce the topic, you may want to set up a meeting with your agent and the managing broker of her firm. Perhaps the managing broker can offer some guidance as to why this keeps on happening.
Credit histories and credit scores are useful tools for lenders. They’re now being used by insurance companies and even prospective employers to decide if you’re credit worthy. Landlords use them to decide whether or not to rent to tenants.
But I don’t think home sellers have any business in asking for a copy of a prospective buyer’s credit history — especially if a mortgage lender has already approved your application for a home loan. The fact that you’ve been preapproved for financing should be enough.
After all, the only thing sellers should care about is that the buyer shows up on the closing day cash in hand. If you’re already approved for your loan, that is not in question.
Readers: Is this happening to you? Please email me your thoughts or share your experiences at ThinkGlink.com.
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