Mortgage Pre Approval Letters & Why They Should Be Made Mandatory By Law

Mortgage Pre Approval Letters & Why They Should Be Made Mandatory By Law

By Emilio DiSpirito, Realtor/Team Leader of The DiSpirito Team with HomeSmart Professionals RI License S35582 Cell Phone 401-359-2338 email emilio@mydreamhomenow.com 501 Centerville Rd Warwick RI 02886

Watch the video "6 Reasons Buyers Need to Be Pre Approved" & read the blog! 

Video Featuring Emilio DiSpirito Realtor with DiSpirito Team & John Castore, NMLS 12727 Mortgage Professional with Semper Home Loans

The real estate process involves many people and is extremely complex. It's hard to nail down exactly how many people are involved, however when you take into consideration the professionals and average family size between buyers and sellers, it's safe to say approx 51 individuals will take part in any one real estate transaction. 

This is what 51 people look like

This is what 51 people in a VW Bus look like

 Much of the perplexity comes in with all of the federal regulations put in place to protect you, the consumer. At the bank alone you have the administrative assistant, loan Originator, processor, underwriter, supervisor, quality control & regulatory department just to name a few. In addition you have the appraiser, home inspector, real estate agent, agents transaction coordinator, broker, contractors, title and closing office and their staff, insurance company and so on.

Home Buyers working hard

Forget about the professionals involved for a second and lets talk about you the buyer and the seller. As a buyer you may be taking time out of work or away from your family & friends in order to search for a home, so you can understand first hand some of the time it takes. You've spent several weeks, hour after hour (even at work.. shhh!!!) checking out the local Rhode Island MLS sites to find your perfect home.

Sellers working hard to prepare for Buyers

Sellers, you have spent several days and sometimes weeks preparing to list your home for sale between selecting  the best agent in Rhode Island, storing valuables, decluttering and organizing your home and having it professionally staged. For every showing you have to make sure you take the 2 dogs and cat in the car with you and for a 30 to 60 minute ride. Some sellers even take time out of work in order to give the floor a last minute sweep and shine and to place cookies in the oven and leave coffee for the buyers. This is your home, it's where you lay your head down at night, have tucked your children into bed and have prepared memorable holiday meals.. It's only natural that you are proud of your home and want it to appear its best and for your agent to help portray why your home is special while protecting your family and assets.

It's easy to see in this brief observation the sacrifices and time you put into buying or selling real estate. By far, the most important people involved in the transaction are you, the home buyer and/or home seller.

So.. This takes us to our point.. Why are a growing number agents & sellers requiring proof of funds (a document from your bank on bank letterhead stating you have "$x amount" to purchase a property) or a mortgage pre approval letter before allowing buyers to see a property?

6 of many reasons why buyers need to be pre approved or show qualification before viewing a property

1. Seller & Realtor Safety - Your Realtor is on the front line.. Several Realtors have been attacked & even murdered from showing homes to undocumented buyers. 
1. News Coverage of Realtors Being Murdered - Non qualified & undocumented buyers. Could of been avoided.
2. Theft - It's sad to say that thieves are smart & know how to take advantage of weak real estate agents. Agents that do not require a pre approval letter are subjecting themselves and their clients to many scary issues, one of which may be immediate theft or allowing a professional criminal in to case the property. Easily avoided by obtaining information from bank or mortgage brokerage. Someone who knows their identity is known would not commit heinous crimes. 
3. Understanding what you are qualified for - Often times you may be looking at homes that you are not qualified to purchase. In many instances, you have the income but maybe you wrote off to many deductions on last years 1040 or you had some leave time from work or your credit score dipped below where it needs to be. Obtaining a mortgage pre approval will allow you to prepare and budget. 
4. Wasting your time as a buyer & time if you're a seller. 
1. Think about the time you spend online.. never mind in person! You could literally be wasting your own time! 
5. You can not purchase a property without proof of funds or a mortgage pre approval. 
1. You can't even test drive a car without the dealership taking a copy of your license.
1. More expensive car brands may require a credit check before test drive or even discussing a purchase. 
2. Some of the worlds most expensive cars cost less than the median home price here in the United States. So why is it unreasonable for a Realtor to gather a pre approval letter?
6. For Your overall best interest
1. You know exactly what you can afford so you can budget and make sure you are comfortable with the monthly payments amid the slue of maintenance costs, utilities, taxes, insurance etc that come with home-ownership. 
2. You save time and heartache. There is nothing sadder than watching potential home buyers fall in love with a home, picture themselves there then to find out that they do not qualify for it. 
3. If you're a seller think about how long it took and takes you to prepare for a showing. You may feel as if your whole routine is flipped upside down during showings. 

The above list is a short example of why a large amount of real estate professionals believe that a mortgage pre approval or proof of funds should be required by law to view properties. By having clear documentation of all parties involved everyone is protected in all aspects. 

Click Pic to See Our Virtual Open Houses

You may ask how can this be enforced in an open house situation? Many buyers at open houses are curious and maybe just starting the home search process and may need some guidance, or many neighborhood potential sellers may be interviewing Realtors to see who does the best job presenting a property.. So how can you account for buyers or potential seller guests that are not pre approved? Upon entrance you require all parties to sign in and show a state ID to confirm name and address. As a Realtor, you make sure you use the "buddy system" and have another agent or mortgage broker with you that can assure your safty and also be another set of eyes while you are showing the basement or second floor and someone to welcome guests in and get them acquainted with the sign in policy. Any serious buyer will not have an issue with this and any serious seller will want this done at their home!  

What are your thoughts? Feel free to leave a comment below!

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