Buyers needing financing for their home purchase often struggle to compete with other buyers willing to pay all cash to close the sale. All-cash buyers are making up an increasing part of sales too. The National Association of Realtors’ latest existing-home sales report shows that in February all-cash sales accounted for 35 percent of transactions.
Some lenders are helping buyers better compete. Known as “pre-underwriting,” they’re putting loan applications through a more thorough venting process before the buyer even enters into a contract for a home, The New York Times reports.
For example, Luxury Mortgage in Stamford, Conn., has started pre-underwriting some of its clients. Unlike pre-approvals for a specified loan amount, lenders take the approval a step further by thoroughly reviewing all documentation that would be required for a formal approval. This type of underwriting is being completed after a house is selected and an offer is accepted, but before the contract is in place.
Another lender – Mortgage Master in Walpole, Mass. – has also taken its pre-approval process a step further. The lender says for some of its buyers it is verifying the same income and asset information upfront that it would typically do for a processed loan application. The aim is to put the borrower in the same position as a cash buyer, Paul Anastos, president of Mortgage Master, told The New York Times.