Ellicott City Realtor Catonsville Realtor

Recently, I've been working with a Buyer who was Pre-Qualified for a VA Loan.  (My Buyer agreed that I should share her story in the hopes of educating others).  My Buyer had a past Bankruptcy, about 5 years ago.  After the Bankruptcy, she was late on two mortgage payments, which was about 4 years ago.  Clearly, she was experiencing some financial distress.  She subsequently sold the home and has maintained a clean credit history since.

Now she's saved enough money, and is ready to purchase another home.  She went to a lender and got Pre Qualified for a VA Loan.  The lender told her that based on her situation, that she was Pre Qualified, but that the loan may or may not go through.

Based on what a Lender is seeing from my Buyer, they told her they could do the loan, and provided her with a Pre-Qualification Letter.  This is where my Buyer stopped listening, and that was her error, she knows.  Because this does not mean that the Lender will do the loan.

My Buyer, however, hears this as Lender legal-speak, and proceeds to look at homes under the assumption that she has been approved for a loan.  Together, we find a house.  Now that we are approaching underwriting, the truth is out.

My Buyer meets all of the VA Loan Programs qualifications for income, assets and credit history and score.  But because of her past financial difficulties, this loan cannot be automatically underwritten - it must be underwritten manually.  We are finding out that Lenders are backed up with manual underwriting, and these loans typically take much longer to fund, if they fund at all.

Here are the real questions:  Was my Buyer really Pre Qualified?  Should she have waited to look at houses until she got an approval?  (The problem is that you have to have a house under contract in order to get an approval).  The answer is probably.  The issue is not that she doesn't meet VA Guidelines;  the issue is that, unlike the past, the Lender is concerned that this loan could not be sold on the secondary market.

What we as Realtors need to understand, and what we must convey to our Buyers and Sellers is that when a Lender says that a Buyer is Pre Qualified or Pre Approved but that the loan may or not fund, unlike loans of the past, this time they mean it.