With multiple offers going in on properties these days, it is important that the buyers offer is given every chance to stand out from the crowd and get accepted. With tougher lending rules now in place, the sellers are learning fast that only the most qualified buyers are getting their loans approved for financing. So from talking to several top agents recently who also list REO’s, I got the inside scoop on what it is they look for in the offers they look at. I want to share some of these tips so you can maximize the chances of getting your buyers accepted too. You can also use these pointers as a reference on your listings too, so you can determine the strength of the buyers offer you will eventually accept. 
 
Here are 4 tips to use when presenting an offer for your buyer. 
   

1. Provide a DU Underwriting approval with all offers
It is imperative that all buyers have an offer that is accompanied by a DU underwriting approval. A DU approval is when the buyers application has been ran through Fannie Mae’s or FHA’s automated DU (Desktop Underwriter) and will issue either an approval or a denial. A pre approval letter does not carry as much weight anymore even if it is from a direct lender, as essentially anyone can write up an approval letter even at a direct lender.
 
An offer letter accompanied by a DU underwriting approval will always place ahead of a basic approval letter, as a DU underwriting approval shows the most important information needed on a buyers profile to give the seller a good idea of the strength of the buyer. For example it lists the credit scores, the debt ratios and the type of loan they are approved for, as well as other information too. Also it is important to note that the DU underwriting approval must match up with the loan program the offer is submitted for, it is not uncommon for example, to have a buyer who has a FHA DU approval but will submit an offer with conforming financing. 

2. Provide proof of down payment funds
Always provide proof of where the down payment funds are coming from for the buyer. Make sure to send over recent bank statements or whatever asset account they are using for the down payment. Make sure there are enough funds in the statements you are providing to match the % of down payment the offer is for. Many times statements are provided but there are not enough funds to cover a 20% down payment for example. If the buyers are going FHA and are getting a gift from the parents, provide a copy of the gift letter from the parents.
 
3. Provide a copy of the buyers credit report (first page only)
If the buyers credit scores are very good, list them on the pre approval letter and point this out on the offer. Also provide a copy of the first page of the buyers credit report that lists the 3 credit bureaus and the 3 fico scores, make sure to black out their social security numbers for privacy issues. This is a great way to provide full transparency on your buyers offer, so the seller can see the credit strength of the buyers profile.
 
Now you may say that providing a copy of the buyers credit and bank statements is a private issue, but the seller can also say, if you don’t want to show everything on the buyers profile then we will consider someone elses offer.
 

4. Make sure the buyers approval is current
Make sure the date on the buyers approval is current. It is not uncommon these days for a buyer to be submitting offers for up to 6 months, so sometimes the pre approval letter or the DU underwriting approval has a date from 6 months ago. This will not fly as perhaps the buyers credit scores have dropped or they do not qualify for a particular loan program anymore. If the date is more than 30 days old make sure to run the buyers application through DU’s automated underwriter again. Remember Fannie Mae and FHA have been making changes to their DU underwriting guides quite frequently recently, so the buyer may not qualify for the particular loan program anymore if a few months have gone by.
 

Be prepared to answer the following questions on your buyer
Many times the seller may ask other questions in regards to a buyers profile to make sure they will qualify for financing. Here is a few examples that the seller may bring up in regards to your buyer.
 
1. What is the buyers employment situation?
Many times the sellers are now asking about a buyers employment situation to make sure they will meet the minimum underwriting requirements for a lender. For example, has the buyer just started a new job, is the buyer self employed, how does the buyer get paid? For example, a lot of lenders are requiring that a buyer be on a new job now for a few months at least, or if your buyer just started a new job, make sure they are salaried and not commissioned only, as most of the time the lenders need 2 years commissioned income to be able to use commission income.
 
If the buyer is self employed, make sure the buyer has filed their taxes for 2009, as some self employed people file extensions on their taxes. If they have not filed, then of course the lender will have to use 07 & 08 taxes to get approved, and if they had a bad year for one of these years they may not qualify for the loan anymore.
 
2. Does the buyer have any additional reserves or funds?
This is an important question these days, as sometimes the sellers are making sure that buyers have back up funds for a plan B just in case there is a change in the transaction that will require additional funds to close. For example, sometimes there are repairs needed on a property that will pop up on an appraisal that the seller will not pay for, or perhaps the appraisal may come in a few thousand short which may leave the buyer a few thousand short for closing, as the lender will only finance the loan based on the appraised value.
 
Here you do not need to provide any additional funds to the seller, but make sure if someone asks these questions that you know the buyer has additional funds for a Plan B scenario. Many times FHA buyers are breaking the bank to buy a home and this can be off putting to a seller in case any additional funds maybe required, it is always a good discussion to have with a buyer to make sure they have “access” to any emergency funds in case a situation arises.

 
Ask these questions on listings
A good idea would be to use the same format above for your listings and request the same information on all buyers. Keep a cheat sheet handy and ask all these questions to the loan officer providing the information for the buyer on your listing, then keep it in the file for the seller. Too many times, something pops up in a buyers profile and no one will know about it until the last minute. This way you will have addressed all the specifics on a buyers profile ahead of time.
 
Full transparency and communication is key to helping a buyers offer get approved from start to finish. I always perform this duty for all the listings I am in charge off, so only solid buyers will get through the door and will get approved for financing.
 
A note on Greece, the EU and mortgage rates

What a week last week was in the financial markets all over the world. The DOW at almost -1000 had its largest one day drop in history, supposedly caused by someone hitting the wrong key on a trade (yet to be confirmed, but the conspiracy theorists are running rampant). Whatever the reason behind the plummeting DOW, it has certainly brought back fear and uncertainty into the markets again.
 
Keep your eye on events in Europe as they DIRECTLY affect interest rates in our markets. For example mortgage rates dropped down to 4.75% last week when the DOW started plummeting, because when there is fear and uncertainty in the markets, investors will pull their funds from the high risk equity markets (stock markets) and flock to the safe haven of US Treasuries and Bonds, thus dragging down interest rates with them. Check out the huge spike in mortgage bonds below (this lowers mortgage rates) last Thursday which was directly proportional to the massive sell off in the DOW on the same day).
 
    Mortgage bond market last week when DOW Plummeted 

 
Remember: When there is weak economic news (Euro zone problems, higher unemployment etc), this normally causes money to flow out of Stocks and into more stable treasuries & Bonds, helping Bonds and home loan rates improve. But if there is strong economic news (lower unemployment, Euro Zone problems getting fixed, more homes sold etc) investors will pull their money from the lower yielding bond markets and put their money into more risky higher yielding stocks, thus causing mortgage rates to increase. It is an interesting dynamic that generally bad economic news is good for mortgage rates.
 
I hope that these tips above help you and your business, remember the more work that is done upfront to ensure the buyers financial profile and offer is solid, the better chances everyone has of meeting their goals. If you have any questions about any of the information above, or you need help getting a buyer approved, please do not hesitate to contact me directly at 858-200-9602. I look forward to chatting soon.  
 
 

  

   
  

This entry was posted on Thursday, May 13th, 2010 at 8:46 pm and is filed under Michaels Housing and Market Updates. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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