In April I caught my dog Kevin issuing pre-approvals and blogged about it. 😊
I was being mildly facetious, making fun of all the companies that issue “pre-approvals” based solely on “DU” findings and/or cursory reviews of pay-stubs, W2s and credit reports.
“DU,” once again, stands for “Desktop Underwriter” and it is the software that Fannie Mae requires lenders to use to pre-approve every borrower in need of Fannie Mae or FHA financing.
The problem with focusing solely on DU findings or upon a cursory document review is that major issues are often missed that only surface after a buyer is in contract.
These issues often kill transactions altogether too, wasting everyone’s time and money, and putting earnest money deposits at risk.
We know this for certain b/c we have a constant stream of borrowers coming to us from other lenders after their loans have blown up in escrow.
80% of the time, lenders can rely 100% on DU findings without issues, but 20% of the time there are major issues that DU simply misses (the above-linked blog lists several examples).
And this is why we ask for so much documentation when we pre-approve borrowers. We want to make sure we do not miss any deal-killing issues.
MANY LENDERS JUST GAMBLE THAT CONDITIONS WILL BE MISSED
A few months ago, we had a borrower become frustrated b/c we wanted to make sure his employer would be OK with a potential move that was over 80 miles from his place of work.
90% of all underwriters would ask about this issue so we addressed it upfront.
The borrower, however, found another lender that simply gambled that the condition would be missed and sure enough he got lucky, as underwriters do miss conditions all the time.
But, given the enormity of the stakes, we think gambling on missed conditions is no way to do business.
Hence, we will continue to ask for everything upfront.
We take enormous pride in the strength and accuracy of our pre-approvals, and we never want to put our clients or agent-partners at risk.
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 310167