How do lenders work in terms of pre-approval?

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I’m in southern California looking to borrow $ 260K in loan amount. I’ve looking around for various lenders with the best interest-rate. I see there are banks (Wamu, Bank of America, Wells Fargo, etc) and then there are lending companies that also do pre-approval. Well, I was using LendingTree and found matches that were with lenders outside of my state. One of which is Advance Mortgage Corp.

Now, what I don’t understand is, how does this work if I can’t meet with them face-to-face in my area? So, I can be pre-approved by a company in Utah, but how will the finanicial work if they’re not a bank? I’m confused on how national lending company works.

5 Comments
  1. Reply
    Jeff G
    February 18, 2011 at 12:52 pm

    In general they will send you loan information in a good faith estimate that will detail the loan amount, payments, etc. From this you can make the choice as to whether it’s something you want.

  2. Reply
    phillip w
    February 18, 2011 at 1:06 pm

    Pre approved doesn’t mean anything.they use it to
    to get you to fill out a application.It don’t mean
    your going to get a loan.Once you fill out a application.they sell it to a bank,who Selle’s it to
    lending company that has a high % rate.

  3. Reply
    mazziatplay
    February 18, 2011 at 1:11 pm

    These brokers/lenders have gone through the steps necessary to do business in your state. They will put the package together, get the approval, and send the documents to your location to be signed and returned. They will then sell the servicing to an investor to whom you will make your payments. At least, that is how it should work.

    The problem that can occur is that they don’t do their job correctly, or they over promise and underdeliver, or they charge you more than they promised and you can’t get at them beacuse they are too far away. You may not even know if you are getting what you wre promised untilyou get to the closing table and realize that nothing is as you were told. This decision puts you at the mercy of people you know nothing about and who may or may not be ethical.

    This is the price people pay when they shop for a loan based on rate only. It doesn’t do you any good to make a decision on something you have no guarantee you’ll get. Rate is only one component of what makes a mortgage loan the right one for your needs and goals.

    You’d be much better off calling a local title company and getting referrals to 3 good, well known, experienced local loan officers with whom the escrow officers have had positive experiences.

    We all sell to the same investors, rates are not going to differ that much but costs can vary greatly so compare the Annual Percentage Rate (APR) not the interest rate to find out which quotes are most cost effective. The closer the APR is to the interest rate quoted the less expensive the financing. You will find the APR on the Truth In Lending Disclosure. Run, don’t walk, from any loan officer who won’t give you one before you decide.

    Good luck.

  4. Reply
    acermill
    February 18, 2011 at 1:41 pm

    You are advised to work with a local lender with whom you can have personal contact when needed. As a real estate agent, I have dealt with clients who used ‘telephone service’ lenders, and the experiences have NOT been good. Late closing packages, delayed closings, and errors. And that’s not easy to repair when the lender is not nearby.

    The worst I had was a simultaneous closing (one moving in and one moving out) and the distant lender didn’t perform as needed. After several telephone calls, we were told we would just have to delay closing for several days until they got it handled. Meanwhile, I had one couple sitting outside with a moving van of possessions and nowhere to go.

  5. Reply
    Cheryl G
    February 18, 2011 at 1:47 pm

    The company with whom you are working is a loan broker. They will look for the best terms and then, once you are signed up, will sell your loan. This is a common practice and not detrimental to you in any way. Both banks and other lenders do act as brokers.
    The pre-approval is a handy tool to use when looking for a home, but it is not a guarantee from the company, nor is it a lock-in. If rates increase, so can the loan terms change.

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