Questions to Ask a Buyer’s Lender When Verifying Pre-Approval In a competitive real estate market, especially when multiple offers are on a listing, it’s smart for a listing agent to contact the buyer’s lender directly to verify the strength of the pre-approval letter. This helps gauge how likely the deal is to close smoothly, thereby reducing risks such as financing fall-throughs. The goal is to get those “warm and fuzzies” by confirming the buyer is solid without crossing into invasive territory or violating privacy laws. Start the call by introducing yourself, explaining you’re verifying for your seller’s peace of mind, and assuring them you’re not shopping the buyer elsewhere. Below are key questions to ask, with explanations of why each matters, to help you share the rationale with the lender and make the conversation collaborative. Basic Buyer Employment and Income Verification Question: “Is the buyer employed full-time, self-employed, or something else? If self-employed, how many years of tax returns have you reviewed?” Why ask? Employment stability is key to loan approval. Self-employed buyers often require two or more years of tax returns to verify income, which can introduce delays or complications if not already vetted. This helps assess if the buyer’s income source is reliable and if the lender has done their due diligence. Question: “Are you using any bonus, commission, overtime, or variable income in the qualification? If so, has it been averaged over the required period (e.g., 2 years)?” Why ask? Variable income isn’t always straightforward, and lenders typically average it over 24 months, but do not allow declining income. If the buyer’s qualification relies heavily on bonuses or commissions, a dip in future pay could jeopardize the loan. This flags potential risks in income stability. Credit and Debt Profile Question: “Has the buyer’s credit been pulled, and does it meet the program’s minimum requirements? Why ask? Credit scores significantly impact interest rates, loan eligibility, and overall risk assessment. Lenders can’t disclose the exact number due to privacy, but confirming it’s above the threshold (e.g., 620 for FHA, 640+ for conventional) gives assurance the buyer isn’t borderline. Question: “What’s the buyer’s debt-to-income (DTI) ratio, and does it fall comfortably within guidelines (e.g., under 50% for conventional loans)?” Why ask? DTI measures the percentage of the buyer’s income that goes toward debts. A high DTI (close to the max) could mean the loan is stretched thin, increasing denial risk if anything changes (like interest rates rising). A low DTI signals a stronger borrower. Assets and Down Payment Question: “Have you verified the buyer’s assets for down payment, closing costs, and reserves? How many months of reserves do they have post-closing?” Why ask? Lenders require proof of funds to ensure the buyer can cover the down payment and have reserves. This confirms the buyer isn’t overleveraged and can handle unexpected costs, making the offer more reliable. Question: “If the buyer is using gift funds, have they been fully documented and verified? Why ask? Gifts from family are common, but they must be properly sourced to avoid potential fraud flags. Undocumented gifts can delay underwriting or jeopardize the deal, so verifying this upfront helps identify potential issues. Property and Loan Details Question: “Does the buyer own any other properties? If so, are they being sold as part of this transaction, or will they carry multiple mortgages?” Why ask? Owning other properties affects DTI and reserves. If they’re not selling an existing home, it could complicate qualification. Question: “What type of loan is this (e.g., conventional, FHA, VA)? And what’s the down payment percentage?” Why ask? Loan types have different guidelines. FHA allows lower down payments but has stricter property inspection requirements. VA has no down payment but has more stringent eligibility requirements. A higher down payment (e.g., 20%+) shows buyer commitment and avoids mortgage insurance, strengthening the offer. We have also seen agents put 20% down on a contract when the buyer has only 5% down, and the lender may not be involved in the scheme, so this is a critical question. Question: “Have you run the loan through automated underwriting like Desktop Underwriter (DU) or Loan Prospector (LP), and did it come back approved?” Why ask? DU/LP are Fannie Mae/Freddie Mac systems that provide initial approval. An “approve/eligible” finding indicates that the loan has passed automated checks, thereby reducing manual underwriting risks. If not run yet, it might indicate the pre-approval is preliminary. Please note that an automated approval is not necessarily accurate, as it can be manipulated to include any income you need to obtain an automated approval. Additional Risk Factors and Timeline Question: “Has the buyer been in escrow before on another property? If so, why was that transaction canceled?” Why ask? A previous escrow cancellation could signal issues such as financing problems or buyer indecision. Understanding the reason helps assess the buyer’s reliability and whether similar risks might arise in this transaction. Question: “Are there any contingencies or conditions on the pre-approval (e.g., needing to pay off debts, sell assets, or resolve credit disputes)?” Why ask? Pre-approvals often have “subject to” clauses. Unresolved conditions could delay closing, so knowing them helps evaluate if the buyer is truly ready. Question: “How long have you been working with this buyer, and have you gone over rates lately?” Why ask? A long relationship suggests the lender knows the buyer well. The buyer must know what the payments will be. Question: “Based on what you’ve seen, how confident are you (on a scale of 1-10) that this loan will close on time, assuming the appraisal and inspection go smoothly?” Why ask? This is a soft, open-ended question to get the lender’s gut feel. It encourages honesty without being specific and can reveal red flags that they might not otherwise mention. Tips for the Conversation Be collaborative: Frame it as “helping my seller choose the strongest offer” rather than doubting the buyer. Offer to share property details if needed. Privacy note: Regulations bind lenders, so they may not be able to answer all questions. If they push back, that’s a potential yellow flag, and strong lenders are usually transparent. Follow up: Ask for the lender’s direct contact information and consider looping them in during negotiations. When to dig deeper: In multiple offers, prioritize buyers whose lenders provide detailed, confident responses. If answers are vague, it might mean the pre-approval is weak. This list should cover most bases without overwhelming the call. If you have specific details about the property (e.g., it’s a condo or requires repairs), tailor your questions accordingly. Please let me know if you have any questions or if a client needs my guidance. I’m just a call, text, or email away. 📞 Direct Line: 661-291-2222 – Text OK 📞 Cell: 661-714-6258 – Text OK 📞 Office: 661-260-2970 ext. 2222 – Text OK 📧 Email: Mike@AugustaFinancial.com But wait, there’s more… Interest Rates Rates are struggling a bit today, but we have had a nice run lately. There’s nothing to panic about, as some profit-taking is occurring, and we can’t go straight to the 3’s. We’ve gotta give it some time! Loan Programs We do loans on Non-warrantable condos! We offer 12-day escrows for pre-approved buyers, including conventional FHA/Jumbo/Bridge loans. We provide loans in all 50 states, so call me with anything you need. Government loans (FHA/VA/USDA) are in the high 5’s and low 6’s. Conventional loans up to $806,500 are in the high 5’s and low 6s. High-balance loans from $806,501 to $1,209,750 are also in the 6’s. Jumbo loans above $1,209,750 are in the 6’s. Bank statement loans are available with 10% down again, with larger down payments in the 6’s++. Profit and Loss Statement loans require 20% down - no bank statements needed, only a profit and loss statement! 0 down loans are available in the high 6s, with a minimum credit score of 620, up to $1,300,000. Private Money lenders offer Hard Money Loans with 35% down. No-Ratio Loans require a 30% down payment. DSCR (Debt Service Coverage Ratio) loans are available with as little as 15% down. Bridge Loans typically have an interest rate of 7.99% with limited fees, helping you get where you need to go! 3/2/1 Buydowns, 2/1 Buydowns, and 1/0 Buydowns are available at great starting rates! Please note that interest rates are subject to change without notice, and the information above reflects LA County Loan Limits.  **Good News for Condos:**  Vista Del Canon – No Longer Naughty! Princessa Estates – We have been informed that this is no longer considered a naughty condo, so we will categorize it as ‘buyer beware’. Valley Di Oro – We have been informed that this is no longer considered a naughty condo, so we will categorize it as ‘buyer beware’.  **Bad News for Condos***   Seco Villas – Insurance Deductible is too high! Rainbow Sierra Terrace Owners – 19826 Sandpiper Place – Insurance coverage, Excess deductible American Beauty Village West – 26864 Claudette – Critical Repairs or Deferred Maintenance Issues. Also, insurance is an issue. Arbor Park – Critical repairs or Deferred Maintenance Issues Old Orchard Condos 23515 Lyons Ave – Unfunded repairs  CONDO HELP!!! If you have a listing or a buyer interested in a specific condo and are unsure whether it is warrantable or Non-warrantable, please call me, and we can look up Fannie’s list in real-time. I have already done that on three condos today, and my list was accurate on all 3. We don’t know when something has changed, and it would be impossible to track everything on a day-by-day basis, but we don’t mind looking up a few items each day.  The full state of California’s naughty list has been added to: MikeMeena.com! See the link below: https://mikemeena.com/non-warrantable-condos/ Let me know if you hear anything new about condos or townhouses. I am available every day if you need anything. 📞 Direct Line: 661-291-2222 – Text OK 📞 Cell: 661-714-6258 – Text OK 📞 Office: 661-260-2970 ext. 2222 – Text OK 📧 Email: Mike@AugustaFinancial.com Have a great day and an even better tomorrow! Please call me when you have a client who needs to borrow! Mike Meena President | Loan Officer Click to Call or Text: (661) 714-6258 This entry has 0 replies Comments are closed.
