Inconsistencies across Mortgage lender processes for pre-approvals
Member since 2019 · 17 posts · 10 votes
Inconsistencies across Mortgage lender processes for pre-approvals
Most Popular Reply
Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votesQuote from @Mayank Jain:
Hi everyone,
I'm a new home buyer from Bay Area and trying to get pre-approvals in place before I start making offers. I have strong financials and will be doing a >50% down payment for a Condo. DTI < 33%
Some inconsistencies that I am discovering in the process
- Some lenders requiring a hard-credit pull vs some ok pre-approving me with just a soft pull
- Some lenders willing to share a loan estimate sheet with exact costs to close, vs some keep insisting that they "need to run the process to get the loan estimate" and that it can only be done after I get into contract.
Just before going into a contract, I would like compare all of the pre-approvals and compare their rates, exact cost to close & potential time to close & then pick the best one to make the offer.
Ideal scenario
- Pre-approve based on a soft pull (so I don't get my credit score dinged every time I work with a new lender)
- Share loan estimate sheet with pre-approval for a potential property
Am I asking too much from the lenders?
Thanks
Hey Mayank,
I think it's best just to ask for a soft quote based on verbal information. Also it would be fair for you to disclose upfront that you are shopping around for the best rate and fees.
But honestly, have you just tried going to your local bank to see what they offer you? Usually if you have several accounts and investments with 1 bank they will provide you with low to no lender fees and the better rate.
The main issue here is that there is a lot of time/effort spent looking at your financials and documents to make sure there are no discrepancies, qualifying you, and sending Pre-Approval Letters, for you to just go with another lender that is offering you the better rate/fees. That time could have been spent working with a committed client that is not only looking for the best terms, but is also looking to establish a long term lending partnership. You might be able to get away with shopping and nickel and diming for a few loans, but once you start to scale, you will see how valuable having a lending partnership with someone that is well-versed in all mortgage products is.
At the end of the day, most loan officers are in the business to close loans. Asking for an LE, Full Pre- Approval and multiple estimates, just to not work with them is a waste of time. No offense to you, but that's just the reality.
LuxePrivate Investments LLC 572 Reviews
9 Replies
- 1yTaylor DaschBusiness MemberReal Estate Agent · Temple, TX · Member since 2022 · 1k+ posts · 700 votes
I believe the hard credit pull is when they want to have everything before hand in order to give you a more solid pre approval or the lender cares more about their approval to close ratio. I think it would be better to have them do a hard pull if you already started getting a few hard pulls - I believe they will all be categorized into just one hard pull if you do them within the first 2 weeks but am not too knowledgeable on the subject. Or if you want to just do the soft pull you can request that but its possible they will give you numbers that arent as accurate. I would ask a realtor for their preferred lender and just go with them assuming I have a few other quotes and the lender is competitive with these.
Taylor Dasch | EG Realty560 Reviews - Member since 2019 · 17 posts · 10 votes1y
And what are your thoughts about the loan estimate sheet?
- 1yErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
Quote from @Mayank Jain:
Hi everyone,
I'm a new home buyer from Bay Area and trying to get pre-approvals in place before I start making offers. I have strong financials and will be doing a >50% down payment for a Condo. DTI < 33%
Some inconsistencies that I am discovering in the process
- Some lenders requiring a hard-credit pull vs some ok pre-approving me with just a soft pull
- Some lenders willing to share a loan estimate sheet with exact costs to close, vs some keep insisting that they "need to run the process to get the loan estimate" and that it can only be done after I get into contract.Just before going into a contract, I would like compare all of the pre-approvals and compare their rates, exact cost to close & potential time to close & then pick the best one to make the offer.
Ideal scenario
- Pre-approve based on a soft pull (so I don't get my credit score dinged every time I work with a new lender)
- Share loan estimate sheet with pre-approval for a potential property
Am I asking too much from the lenders?Thanks
Hey Mayank,
I think it's best just to ask for a soft quote based on verbal information. Also it would be fair for you to disclose upfront that you are shopping around for the best rate and fees.
But honestly, have you just tried going to your local bank to see what they offer you? Usually if you have several accounts and investments with 1 bank they will provide you with low to no lender fees and the better rate.
The main issue here is that there is a lot of time/effort spent looking at your financials and documents to make sure there are no discrepancies, qualifying you, and sending Pre-Approval Letters, for you to just go with another lender that is offering you the better rate/fees. That time could have been spent working with a committed client that is not only looking for the best terms, but is also looking to establish a long term lending partnership. You might be able to get away with shopping and nickel and diming for a few loans, but once you start to scale, you will see how valuable having a lending partnership with someone that is well-versed in all mortgage products is.
At the end of the day, most loan officers are in the business to close loans. Asking for an LE, Full Pre- Approval and multiple estimates, just to not work with them is a waste of time. No offense to you, but that's just the reality.
LuxePrivate Investments LLC 572 Reviews - Member since 2019 · 17 posts · 10 votes1y
Thats a fair point @Erik Estrada about not wasting a lender's time & effort - but how do I identify a good lending partnership if they don't disclose their numbers & estimates to me?
- 1yJohn BurkePro MemberLender · Temple, Texas/Nationwide · Member since 2024 · 85 posts · 24 votesHard pull VS Soft pull. A hard pull allows a lender to run your file through an automated underwriting system to determine whether or not you're pre-qualified. With a soft pull, it's a gamble. You're relying on LO's judgment which is risky unless you're A paper.
Quote from @Mayank Jain:
Another thing to note: Some lenders just don't utilize soft pulls, so they have no choice but to do a hard pull. Lenders that can do either, will generally start with soft pull to avoid having you end up in "trigger lead pool".
You really didn't even need to get pre-qualified with anyone to a get rate and fee quote. Lenders do that to get you invested in the process. Lenders will not send out an LE without a complete application (which includes a property address) because it's basically binding. You can ask for a scenario or closing cost estimate instead. - 1yErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
Quote from @Mayank Jain:
Thats a fair point @Erik Estrada about not wasting a lender's time & effort - but how do I identify a good lending partnership if they don't disclose their numbers & estimates to me?
Just ask for a soft quote easily on the phone or email. All they need to know is your credit, estimated DTI, purchase price, and down payment. You should be able to get a quote with just this information.
But besides the rates and fees, you should be looking for how qualified the loan officer is. If they aren't doing much business/volume, they will send you a nice looking term sheet, and you will go through hell trying to get the loan closed. Sometimes it's better to pay a bit more, for a real professional to handle your most important transaction.
LuxePrivate Investments LLC 572 Reviews - Lender · Cleveland, OH · Member since 2011 · 587 posts · 435 votes1y
If you want a legitimate preapproval then you should be doing a tri-merge "hard" pull.
Props to @Erik Estrada for shooting straight. His explanation is spot on. If you are unwilling to be committed enough to a lender to even allow them to do a credit pull then they are probably less likely to take the time to provide you a detailed cost/fee breakdown especially when they know you have a lineup of lenders that you are considering.
Your question asking for detailed loan estimates from multiple lenders at the preapproval stage with "exact cost to close" is very problematic. This isnt a "Mayank" problem. This is an industry problem. We as the lender are tasked with estimating countless figures for customers even though the lender has very little control over most of the figures. The title company/settlement agent is responsible for more than half of the costs listed on a settlement statement. Very rarely are we provided with those figures up front.
We dont know if we are closing on the 1st of the month or the 30th of the month so we don't know if we are collecting 1 day of interest or 30 days of interest. Often times we don't know the exact transfer taxes because they can vary by state, county and even city. Even if we do know the exact transfer tax, we haven't seen the contract to know if the transfer taxes are being paid by the buyer or the seller or if they are being paid 50/50. What about property tax prorations. Does the seller owe the buyer money or does the buyer owe the seller for property tax prorations? Is your home insurance going to be $1200/year or $6,000/year. Are you escrowing taxes and insurance or are you waiving tax and insurance escrow...... and on and on and on.
The main problem is that most customers just look at the bottom line and mortgage loan officers know that. There are many loan officers who will intentionally lowball all the third party costs and prepaid items up front so their estimate will look more appealing.
If you really want to compare multiple lenders then you just need to focus on the part of the transaction that the lender controls. If you provide your credit score, purchase price, estimated down payment, property type, occupancy type and desired term, then most lenders should be able to provide you with their current interest rate, any associated points or lender credits for the rate provided, and their total origination fees. If you are shopping based on rates and fees, these answers should provide you the detail needed to make an informed decision.
- 1yErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
Quote from @Eric Veronica:
If you want a legitimate preapproval then you should be doing a tri-merge "hard" pull.
Props to @Erik Estrada for shooting straight. His explanation is spot on. If you are unwilling to be committed enough to a lender to even allow them to do a credit pull then they are probably less likely to take the time to provide you a detailed cost/fee breakdown especially when they know you have a lineup of lenders that you are considering.
Your question asking for detailed loan estimates from multiple lenders at the preapproval stage with "exact cost to close" is very problematic. This isnt a "Mayank" problem. This is an industry problem. We as the lender are tasked with estimating countless figures for customers even though the lender has very little control over most of the figures. The title company/settlement agent is responsible for more than half of the costs listed on a settlement statement. Very rarely are we provided with those figures up front.
We dont know if we are closing on the 1st of the month or the 30th of the month so we don't know if we are collecting 1 day of interest or 30 days of interest. Often times we don't know the exact transfer taxes because they can vary by state, county and even city. Even if we do know the exact transfer tax, we haven't seen the contract to know if the transfer taxes are being paid by the buyer or the seller or if they are being paid 50/50. What about property tax prorations. Does the seller owe the buyer money or does the buyer owe the seller for property tax prorations? Is your home insurance going to be $1200/year or $6,000/year. Are you escrowing taxes and insurance or are you waiving tax and insurance escrow...... and on and on and on.
The main problem is that most customers just look at the bottom line and mortgage loan officers know that. There are many loan officers who will intentionally lowball all the third party costs and prepaid items up front so their estimate will look more appealing.
If you really want to compare multiple lenders then you just need to focus on the part of the transaction that the lender controls. If you provide your credit score, purchase price, estimated down payment, property type, occupancy type and desired term, then most lenders should be able to provide you with their current interest rate, any associated points or lender credits for the rate provided, and their total origination fees. If you are shopping based on rates and fees, these answers should provide you the detail needed to make an informed decision.
This is a solid explanation! As a borrower shopping multiple lenders, your main concerns should be the following:
1. Lender Fees (Origination, Processing, Underwriting, Review Fees Etc..)
2. Par Rate (What is the rate priced with 0 discount points?)
3. Reputability (Do they have any licensing? Reviews? Experience?)
5. UW turn times (If you send docs for review, how long will the underwriter take to review?)
Everything else is out of the lenders control. We have no control of the condition of your property, if the value will appraise at where you feel it will appraise at, selecting specific appraisers, making sure the title to your property is free of any liens/judgements, what the title company will charge you, how much the AMC will charge you for an appraisal, what your property taxes will be, how much your insurance will cost you, and the list goes on..
LuxePrivate Investments LLC 572 Reviews - Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes1yWhy would that many lenders put that much effort into the deal if you aren't committed to them? It costs money for them to create the information you are looking for. They need to eat and pay bills, so they are going with the ones they think they can close.
Quote from @Mayank Jain:
Hi everyone,
I'm a new home buyer from Bay Area and trying to get pre-approvals in place before I start making offers. I have strong financials and will be doing a >50% down payment for a Condo. DTI < 33%
Some inconsistencies that I am discovering in the process
- Some lenders requiring a hard-credit pull vs some ok pre-approving me with just a soft pull
- Some lenders willing to share a loan estimate sheet with exact costs to close, vs some keep insisting that they "need to run the process to get the loan estimate" and that it can only be done after I get into contract.Just before going into a contract, I would like compare all of the pre-approvals and compare their rates, exact cost to close & potential time to close & then pick the best one to make the offer.
Ideal scenario
- Pre-approve based on a soft pull (so I don't get my credit score dinged every time I work with a new lender)
- Share loan estimate sheet with pre-approval for a potential property
Am I asking too much from the lenders?Thanks
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