In July 2010 Genworth Financial, released their “Financial Fitness Index” results.Interestingly the survey indicates that only 22% of first-time buyers and intended buyers seek mortgage preapproval from lenders.
Yet in a 2005 CMHC Report called “CONSUMER INTENTIONS to buy or renovate a home”, 43 per cent of potential buyers talked to a financial institution about obtaining a mortgage and more than two-thirds had been pre-approved for a mortgage.”
Betty Talbot and Gidia Molinaro, Mortgage Agents for Centum Omni Mortgage Corp, added the following:
- Many lenders today shy away from preapproval.Lenders have claimed they lose about $500 per potential customer in the time it takes to preapprove someone. They argue that they take the time to preapprove the customer who then goes rate shopping and may not return to the lender.
- With online applications, preapprovals are subject to all the various paperwork, (income verifications, other debts, support payments, the property and more). In effect this is really not a preapproval.
The result is that most lenders will only give buyers a rate guarantee for a stipulated period (usually 90-120 days), a far cry from preapproval.
In addition, some salespeople may draft offers for buyers without having them pre-approved or confirming their ability to buy for any number of reasons, such as:
- The buyer believes he/she will qualify for a mortgage and the salesperson does not want to press the issue for fear of alienating the buyer,
- The buyer thinks he/she has been preapproved when they only have a rate guarantee,
- In today’s softer market, some real estate salespeople may simply sidestep this important basic.
This results in hours of viewing homes and negotiating an offer, only to discover that the mortgage cannot be arranged because the buyer does not qualify.
Though they are not the lender, a good mortgage agent will take the time to carry out a fairly reliable preapproval process, based on:
- Their knowledge of what lenders look for, and
- Which lenders provide the best rates.
They will also verify a buyer’s debts, credit rating and income.
This valuable service helps eliminate wasted time, discouragement and frustration by all concerned, buyers, sellers, mortgage agents and real estate salespeople.