Pre-Approval vs Pre-Qualification

MaryBeth:                          Mary Beth Harrison with Dallas Native Voice and I’m sitting with Jason Browning with Academy Mortgage, and I have a question for you today. My… Before you even, we take people out to even look at houses, we strongly push them to get preapproved, which is different than being just pre-qualified.

Jason Browning:               Correct.

MaryBeth:                          So address both of those and tell me why one versus another, and what’s the best way to go about this? How to get someone… Because when we find a house, any good realtor is going to ask for a letter, right?

Jason Browning:               That’s correct.

MaryBeth:                          And one kind of you breathing on glass and the other one actually talk to you.

Jason Browning:               Right. Yes, exactly. So imagine this, one of them is basically having you fill out a loan application.

MaryBeth:                          Mm-hmm (affirmative).

Jason Browning:               And then I’m just going to take what you put on there as as the truth.

MaryBeth:                          Okay.

Jason Browning:               So if you say you make $1 million a month, and your credit scores are 700, and you’ve got $2 million in the bank and we’re going to say, “Okay. You know what? You’re preapproved.

MaryBeth:                          You’re good.

Jason Browning:               I’m just going to go and send you a letter.

MaryBeth:                          So I breathe really well on gas. Okay.

Jason Browning:               Yes, you do. and you have a heartbeat.

MaryBeth:                          Okay.

Jason Browning:               So the second version of that, which is the one that we recommend that you do and you do as well-

MaryBeth:                          Yes.

Jason Browning:               … is, well, you put that information on the application, but we also pull the credit, and then we go verify that information with requesting documents from the borrower.

MaryBeth:                          Okay.

Jason Browning:               Pay stubs, W2’s, tax returns, things of that nature.

MaryBeth:                          I call it the two, two, twos.

Jason Browning:               Exactly.

MaryBeth:                          The two of…

Jason Browning:               Bank statements, two months pay stub, or two months of two, two, two months of bank statements, two pay stubs, two years tax returns.

MaryBeth:                          Got it.

Jason Browning:               It’s not that bad.

MaryBeth:                          Two, two, twos, that’s all right. That’s what I tell them. Go look for the two, two, twos and you got it. Okay.

Jason Browning:               Right. So I mean, because I have a lot of lenders that will do the prequal process.

MaryBeth:                          Right.

Jason Browning:               And then they get up to the finish line and they end up losing money and they don’t close. And if they would have just gone that extra step to say, “I know it’s…” It could be inconvenient, but more than likely this information is going to be at your fingertips nowadays. And you know, it takes a matter of 24 hours to get that stuff over and get the preapproval done.

MaryBeth:                          Oh, wow.

Jason Browning:               And then at that point, I can send that letter over and that is as good as a cash offer in a lot of cases that we can call up the listing agent, say, “Hey, I’ve already looked at this information and you’re good to go.”

MaryBeth:                          Yeah. Because when I get a prequalification letter on one of my listings, I’m like, that doesn’t tell me anything other than you picked up the phone and maybe talk to a lender.

Jason Browning:               Maybe not.

MaryBeth:                          Yeah. And he was gracious or she was gracious enough to write a random letter going, “Yeah, you’re prequalified but we still need this, this, this, and this, and this.” You know you’re going to need that to buy a house. So why not get on it-

Jason Browning:               Right.

MaryBeth:                          … and have it there? Because…

Jason Browning:               The thing is you just don’t want any surprises.

MaryBeth:                          No, no.

Jason Browning:               You know, if you have all the leg work done upfront and you know that when you go to that making that offer process for one that the deal is going to close.

MaryBeth:                          Yes.

Jason Browning:               And you don’t… You’re not putting your family in, you know, a situation where you think you’re moving in, then you’re not. Or you know, something along those lines.

MaryBeth:                          Yeah. Another question. On our contracts and third party finance, it says that the buyer will have been deemed to be approved within so many days. What is a reasonable amount of time to put in there?

Jason Browning:               Well, you know, we’re really trying to speed up our process. You know, we can see anywhere from 14 days, 10 days. You know, again, we can have that as a negotiation tool as well if we really need to speed up the process.

MaryBeth:                          Right.

Jason Browning:               So you’re usually, what you guys do is perfect, and that is around the 14 day timeframe, I believe.

MaryBeth:                          Right. Yeah. Well, and I always tell people, if you’ve got all your ducks in a row and everything’s been given to you, then really I need a house to go with my loan.

Jason Browning:               Correct.

MaryBeth:                          Rather than I need a loan to go with my house. So totally different mentality and now you’re shopping, knowing exactly what you can spend or want to spend.

Jason Browning:               Correct. Correct.

MaryBeth:                          Because sometimes you’ll tell me that I can have payments up to $3000 a month and I’m like, “No, no. No, I can’t.” You know?

Jason Browning:               Probably want to budget around this.

MaryBeth:                          Exactly.

Jason Browning:               Exactly right.

MaryBeth:                          And so I know what my top dollar is, but then I can bring it down to what I’m comfortable with.

Jason Browning:               Right.

MaryBeth:                          And so all of those things come into it. The other thing I really appreciate is you’ll take people who might, something might show up on their credit report that you can help them with, “Pay this one off, don’t worry about this one.”

Jason Browning:               Right.

MaryBeth:                          And it will help the credit score really quickly.

Jason Browning:               Yes. Within usually five to seven days, we can do those things as well.

MaryBeth:                          Right.

Jason Browning:               Let me share this with you as well. With our clients in particular that we share, our average close time from the day that we take the application-

MaryBeth:                          Right.

Jason Browning:               … to the day that we close is just under 15 days.

MaryBeth:                          Yes.

Jason Browning:               And that’s because we do that leg work upfront. And then we can go to that seller and say, “How about this? I know you really want to get this house sold.”

MaryBeth:                          Mm-hmm (affirmative).

Jason Browning:               “What if we can close in 15 days?”

MaryBeth:                          Yeah.

Jason Browning:               You know, like, “Oh, well, let’s go.” That helps you win offers with that situation.

MaryBeth:                          Absolutely. Absolutely. Even if we have to lease the house back to the seller for a handful of days or for a week or two, they know they’ve got their money in hand and they can go buy the next house, which typically is that domino effect that-

Jason Browning:               Absolutely.

MaryBeth:                          … we go through. So yeah. Good information. Okay. Well, that helps me. So prequal? Nope, we want preapproval. We want all the documentation in, and we want to be solid when we go in.

Jason Browning:               Absolutely.

MaryBeth:                          Okay. That’s good. Good information. Well, you can find us on all social media. We go where you go. And thanks so much for listening.


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