Pre-approvals fall by the wayside
Loan pre-approvals provide borrowers with guidance on how much home they can afford and their likely interest rate. But new data suggests lenders are pulling away from pre-approvals. MarketWatch explains:
Housing experts, however, say the decline in preapprovals is largely due to dwindling competition among mortgage lenders for new clients. Prior to the recession, lenders used preapprovals as way to attract would-be borrowers. Buyers who had this commitment from a lender were more likely to turn to this company when they were ready to get the actual mortgage, says Keith Gumbinger, vice president at mortgage-info site HSH.com.
Separately, lower-than-expected appraisals of homes have resulted in fewer preapprovals, says Gumbinger. Preapprovals are usually given before buyers identify the home they want to buy. When the home’s appraisal is determined to be lower than the purchase price the buyer and seller agreed to, the lender often requires the buyer to come up with the extra cash to make up the difference.