Pre-Qualification Letters: Fact or Farce ?

Our COO came across an article published on Yahoo yesterday. It basically talked about how pre-qualification letters for buying homes are not reliable come time to purchase.

A pre-qualification letter, or prequal, is a written document stating an individual's financial capacity to purchase a property through a home loan, financing, or mortgage.

Typically, a direct lender or mortgage broker issues the prequal to the homebuyer for presentation to sellers in his or her effort to make an offer on a property.

The prequal letter includes the price of the property the buyer wants to purchase, alongside the loan-to-value (LTV) the lender is issuing. For instance, if the purchase price of a home is $500,000 the lender will indicate a 70% loan to value. Meaning the buyer has the capacity to obtain a loan of up to $350,000 to put towards the purchase of the house under a mortgage. Now, the 30% remainder may be in a form of a down payment the borrower himself is issuing or a second mortgage that he may obtain either from another lender or the same lender. A second loan will entail a separate prequal letter.

The article on Yahoo may basing its opinions on some prequal letters that may have not held true come time for the actual purchase transaction. But at Redondo Mortgage Center, we make sure that our prequals are solid. We only issue prequals upon:

1. A comprehensive loan application process 
2. Thorough review of documents borrowers need to submit (identification/taxes, credit authorization, etc.)
3. Verification of employment
4. Verification of assets: Bank statements/Retirement Fund/Other Collateral

The maximum LTV is based on different qualifications determined by several factors depending on the lender, bank or, other financial institution:

1. FICO score and other credit considerations such as  debt-to-income ratios, derogatory notations, etc.
2. Assets
3. Income
4. Liabilities
5. Job tenure

Here in the South Bay, realtors acknowledge the validity of an RMC prequal letter. Backed by nearly a quarter of a century of experience and a reputation of utmost integrity. 

If you are purchasing a home and want a good chance at purchasing your dream home, try Redondo MortgageCenter first. You may call 310-318-8999 or you may visit www.redondomortgage.com