The Dodd-Frank Consumer Protection Act, which was signed into law in July 2010, forever changed the housing market landscape. Designed to restore consumer confidence in the housing industry, the law has created strict regulatory mandates, the impact of which are being felt by both mortgage lenders and mortgage seekers.Potential homebuyers are unlikely to be aware of these nuances, and that's fine, but loan officers could use a few strategies to help them walk their clients through the pre-approval process.
One specific area where the changes are being felt is in the pre-approval process. Previously, at the start of the homebuying process, it was customary to obtain a pre-qualification, which essentially meant that a buyer “could” qualify if they found a home, but it wasn’t a guarantee. These new regulations are making sellers leery of pre-qualifications and are causing them to demand pre-approvals, an actual credit approval decision, instead.
Pre-approval actually has a positive outcome for some buyers. With the speed at which homes are now moving, buyers with a pre-approval attached to their bid are more likely to be considered than those without one. The pre-approved buyer is the next best option to an “all cash” buyer who requires no financing at all. So what all goes into the pre-approval process?
Read more: The Dodd-Frank mortgage shift: From pre-qualify to pre-approval | REwired
