I’m going to reflect on an experience I had in the past before I get into the subject matter… In 2004 I had an experience where my client was pre-approved and ready to buy a home, or so it seemed.
The Experience: With my client, we’ll call her Ms. Adams, she was referred to an independent mortgage company by a friend. Before I go on let it be known that in this business there are literally thousands of mortgage/finance companies (especially in the NYC area) so receiving a pre-approval letter from a company I’ve never heard of isn’t out of the realm of possibility. Because of this I do a reasonable amount of due diligence on the mortgage company handing out the pre-approval if it’s not a well known company by calling the mortgage broker and finding out the details of the pre-approval. In the situation of Ms. Adams her loan was approved and supposedly verified by the mortgage broker but once we found a house that my client loved she found out that she was unable to afford the payments on the home. It was truly heart breaking and it ended with a very emotional conversation over the phone where Ms. Adams had more than a few negative things to say about the mortgage broker who set up her loan.
What went wrong? – The end result: Ms. Adams didn’t get the home of her dreams and she was mentally distraught because of it. In this situation I feel that Ms. Adams could have saved herself much anguish by becoming more educated and asking more questions about the pre-approval process. Any serious business professional should be able to answer the questions you may have and will take the time to explain the process to you. I am by no means suggesting you become a certified professional yourself but being an educated consumer will pay off big time!
After this experience I admittedly began to feel jaded towards the little guy mortgage companies but shortly after I met another client that ended up having a fake Washington Mutual pre-approval letter so you never really know.
To save yourself from this tragic beginning and possible ending to your house hunting quest I have a few pointers for you:
1) Start your pre-approval process with a well known, national company or with the financial institution you do most of your business with. – The mortgage broker/banker that you decide to give your business to will need a lot of personal information about you including your social security number. You wouldn’t just hand out your credit cards, bank account and social security information to a random person off the street nor should you take that chance when getting your pre-approval.
2) Accept referrals from friends and family with a handful of salt. – Friends and family are trustworthy people; that’s why they are your friends and family right? That being said you should still do some research into the mortgage professional that was referred to you, find out more about their company and ask for references from past clients. You may be surprised to find that a lot of times a friend or family member will refer you to someone they know who is new to the business or someone they have not completed a full transaction with yet. While they have nothing but the best of intentions you’ll have little recourse if something goes wrong and your relationship with that person suffers.
3) Become an educated consumer! – As I mentioned before: it’s your life, money and privacy on the line so guard it as best as possible! Read a book on home financing (or utilize an excellent free resource which you can find in the links on the right side of this page), discuss the process with your Realtor and ask for a recommendation (we get to experience the quality of many mortgage professionals first hand and will be able to refer you to someone who excels in their field) and find out what you are paying for in your closing costs (aka settlement costs).
