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Why Pre-approvals are only a guideline unless they have been underwritten first.

Why pre-approvals are only guidelines unless underwritten first.

I have talked to many realtors about pre-approvals. Most ask the same question. Why do so many pre-approvals get turned down by the lender that issued the Pre-approval to start with after they find the client a home?

The reason for this is simple. In order to keep costs down most lenders do not do much if any underwriting of the file before a property is found. They rely on credit scores and what the client says they earn as well as what the client says their debt payments are.

Very often the client does not know that his payment that he makes each month may not be the payment the lender will use in figuring out his debt servicing. The computer that is set up to do the pre-approval does not always account of it either.

This means that until an Underwriter looks at the file you as the client will not know for sure if you debt service or not.

I for one look at all the credit and make the adjustments before sending in the application for the pre-approval to the lender.

More on this topic tomorrow.

Allan Burnett

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