With the buy-to-rent sector set to grow from $17bn to $100bn over the next several years and investors paying cash for properties, prospective homeowners can be left out in the cold. Preapproval can give them bargaining leverage – but it has to be done the right way, says one mortgage banker.
“About four years ago when this (buy-to-rent spike) started coming about … in order to combat that, I kind of came up with my own system called the reliable preapproval process,” said Matt Weaver, senior mortgage banker at WCS Lending. “I made a preapproval process very thorough, very extensive. Fast forward, and now I have a 100 percent closure rate.”
But that rate comes at a price, Weaver said – and the price is taking infinite pains to do the job right.
“The only way I can compete with a cash offer is to thoroughly vet out that client and promote him to that listing agent,” Weaver said. “The philosophy is taking the onus off the borrower and putting it on ourselves as mortgage professionals.”
That means checking and double-checking the paperwork, Weaver said. To do a preapproval, he requires borrowers to provide documentation for all their finances up front, rather than just filling in the blanks on a form.
“Say you’ve got a borrower who says they make $50,000 a year,” Weaver said. “The problem with that is they might make $49,000 a year and have had a bonus within that income, and that can blow up down the line. … I take that application and back up everything that they’re saying. Not that they’re lying or misleading, but they’re not in the industry. Ask for all the documentation up front, and thoroughly vet it.”
Weaver’s preapproval process means his borrowers can compete when multiple offers are on the table, without worrying if something will arise in the process that wrecks the deal.
“Without the right preapproval process, you can’t go at that listing agent with fierce tenacity,” he said. “What if everything’s going the right way and then it blows up because they have unreimbursed expenses on their tax returns? You wouldn’t believe how often that happens.
“The rewarding thing is, I can account for multiple transactions where because of the disciplines of that system, I have gotten the client their home over multiple other officers,” Weaver said. “Could my volume have grown a lot quicker if I didn’t have a more thorough process? Sure. Would I have as good a closing rate? No chance.”