One common mistake of real estate buyers is to make an offer without first getting their loan fully preapproved. Many times, buyers think they don’t need a loan until their offer is accepted. But once the offer is accepted, especially in today’s market, where most sellers are expecting noncontingent offers, buyers risk losing their 3 percent earnest deposit.
Just a couple of weeks ago, I got an urgent call from a couple who put down $250,000 for their earnest money deposit only to later run into problems with their lender.
It is very important to review all the financial details and get educated on do’s and don’ts before making an offer. Not all preapproval letters are equal. A preapproval letter whipped out in a couple of hours without a deep understanding of the buyers is very risky, as you never know what other factors the buyers didn’t tell you that could affect their final loan approval. That’s why I always prefer to meet with my buyers in person to get to know more about them. For buyers with high debt ratio, short credit history, or other high-risk factors, I normally run a Fannie Mae DU approval or Freddie Mac LP approval during their preapproval process to make sure they pass the Fannie/Freddie guidelines.
Alicia Zhao is a mortgage consultant. Since 2002, she has successfully guided over 1,000 people toward home ownership through personal mortgage planning. She can be reached at AliciaZ@finetsaratoga.com
If you would like to send a real estate-related question to our columnists for consideration, please send an email to: email@example.com