November 15, 2022

I have mentioned before that there are a lot of bad lenders around lately, and it’s amazing how they find buyers that go into escrow, and then I get the call 1-15 days later when things go sideways. I received one of these calls on Friday, and I could do the deal, and one yesterday too, but the buyer didn’t want to try because the other lender broke his spirit. I have been asked to HELP 4-5 times a month lately, and I can’t stress enough that you need to have me, or someone else you trust, look stuff over from the start!

What is the difference between pre-approval and a pre-qualification?

Borrower calls me up, and tells me their income, how their credit is and how much they have down… I have now pre-qualified that borrower. Based on our conversation, I will not send a letter, but many lenders will!!! This is a worthless piece of paper; you can wipe your butt with it!

The next step is pre-approval. After the initial conversation, the buyer gathers information and sends it to us so we can verify the income, assets, and credit. We will pre-underwrite the file and ensure there are no large deposits, the income is stable, there are no detrimental marks on the credit, and the buyer will qualify for the mortgage. We will sometimes take an extra day to review because we are waiting on certain items. We often need a Verification of Employment, an explanation letter, a divorce decree, proof that we have 12 months of spousal support, evidence that someone is making payments on a co-signed vehicle, or many other things. We will then run DU or LP and get approval based on the actual income and assets, not what the buyer tells us. We base our pre-approval on a specific purchase price, and we will look at Property Taxes / Mello-Roos in an area and have to weigh in HOA Fees too! All of these things happen instantaneously, and we should have a pre-approval second after we receive the first document! OK, that last part is a lie, but I know that’s what is expected. Sometimes we can give a pre-approval without all of the documentation, but we have to have the basics!

DU and LP! Yes, I get this request all of the time. “Can I get a copy of the DU?” Sure, do you want me to input whatever income and assets to make the file work? I don’t have to be accurate, and I can falsify everything in the file and even keep certain things out of the file, like credit report items! So why do we ask for that? Oh, because it sounds like you are doing a better job as a listing agent when you are much better off having your lender look over the file and ensure everything is accurate!

A pre-approval letter can be BS, also, so don’t fall for that. You need a trusted lender to make sure that your file will close. If the buyer bails out on a property, the property will sell for less. You may need to take a larger deposit, but those are hard to keep. There are a lot of bad lenders hanging around the industry because Mcdonald’s now has kiosks, and they can’t get their old jobs back.

They need to be more thorough, they are not accurate, and they need to know guidelines. My team has closed over 2500 files since the beginning of 2020 and over 17,000 in my 32-year career! We don’t have fallout after we pre-approve a buyer! I am not saying we are the only one, but I will say that you are playing with fire if you don’t know the other lender.

Rates are a lot better today than they were yesterday. The Producer Price Index came in lower than expected, which helps interest rates and the stock market. More recession fears are starting to hit the market, which is assisting interest rates.

• 30-year Government Loans (FHA / VA) is in the high 5’s and low 6’s.
• Conventional Loans up to $700,000.00 - in the high 5’s and low 6’s.
• High Balance Loans $700,001.00-$ 1,050,000.00 are in the low to mid 6’s
• Jumbo loans above $1,050,000 are in the mid 6’s
• 5/1, 7/1, 10/1 Arms are in the 5’s
• Bank statement loans - They are available with 10% down again! 7’s + depending on down and credit score.
• Stated income loans – I have one bank with 30% down, but everything else has to be perfect! Interest rates are in the 8’s.
• 0 down loans are in the high 7’s to low 8’s- 620 credit score min right now! Mid 6’s, for the most part, up to $725,000.00.
• Private Money lenders - hard Money Loans – 35% down!
• No Ratio Loans 30% down
• Debt Service Coverage loans with as little as 25% down
• Bridge Loans - are typically 7.49% with limited fees – But they get you where you need to go!

Interest rates are subject to change without notice! Above are LA County Loan Limits.

I will be around all week if you have any questions or if someone interested in buying a property! My cell is 661-714-6258, and my office line is 661-260-2970 xt. 2222. Please text me at 661-714-6258 or email me at Mike@AugustaFinancial.com. Have a great day and a better tomorrow! Please call me when you have a client that needs to borrow!