June 18, 2009
Pre-Approvals: A Dying Breed?
Pre-approvals are something many lenders could do without. The problem (from a lender’s perspective) is that people get pre-approved and then frequently don’t close.
One bank that recently did away with pre-approvals in the broker channel was rumoured to be losing $20 million a year on them.
Pre-approvals are pretty expensive, and the return for lenders is debateable. In most cases, less than one-third of pre-approvals actually close. Meanwhile, the lender is tying up human resources to process the applications, as well as capital to hedge the rates (if rates move adversely, the lender is on the hook, so lenders pay to lock-in the interest rates using derivatives).
In recent weeks, some very big-name lenders have halted pre-approvals--either altogether, or in the broker channel. Two of the most prominent have been FirstLine (a division of CIBC) and TD.
There are still some good lenders doing pre-approvals but their numbers are dwindling. Among the best is ING. ING has solid rates, great perks, and they do a full rate look-back (meaning: if rates fall and then rise again, you automatically get the lowest rate during the pre-approval period).
It’ll be interesting to see what the future holds for pre-approvals. If we had to guess, more lenders may eventually either:
A) Eliminate them; or,
B) Start charging rate premiums (some lenders, for example, already charge 0.10% more for pre-approvals).
Here are a few of my favorite past articles from my Lethbridge real estate and mortgage blog you might have missed or wish to recommend them to a friend.
WANTED: Single Women: - Single women are a hot mortgage market
Common Financial Problems - Avoid these financial mistakes
Get Your Credit Score UP - Invaluable insight into your credit score
Mortgage Guidelines Get Tighter - Harder and harder to borrow money
Is Your Mortgage Company Out of Business in 2009? - What to do when your bank goes broke
What is wrong with MLS - Is your info being abused?
Survivor - Real Estate Edition - Let's vote a few more off the island
Robert May is a Realtor, as well as the broker and owner of Rainbow Realty of Lethbridge Alberta . He is also a licensed Lethbridge mortgage broker and financing expert with Canada First Mortgage of Calgary Alberta. He has been in the Lethbridge real estate industry since 1993 and offers full MLS real estate services to Lethbridge and surrounding area, as well as Lethbridge mortgage financing, mortgage refinancing , preapprovals, and Lethbridge heloc financing to Lethbridge and Southern Alberta. He can be found online at this link: mortgage broker Lethbridge
Let me share my 15 years experience in the local Lethbridge real estate and financing market with you! It is the first step towards making a profitable real estate decision.
Robert W May is a Real Estate Broker in Lethbridge Alberta, having now been in the industry for over 23 years. . He was also a licensed Lethbridge mortgage broker and financing expert with Canada First Mortgage of Calgary Alberta for the past 10 years. He is an industry leader always willing to help train and educate others in how to improve their business models for financial and personal benefit.