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from Local Attorney, Michael H. Wasserman

Tuesday, January 15, 2008

the 4 most dangerous words your loan officer will ever tell you: "Your Loan is Approved"


Most loan officers I work with are nice people. They are hard working. They are well intentioned. They want to make loans for the buyers they work with. Turns out however, that many of them speak an entirely different sort of English than the rest of us.


When your friendly loan officer assures that "your loan is approved," she does not necessarily mean that you are going to get your loan. "Approved" does not mean "Approved!" weird, huh?

Most Buyers who hear this however are willing to take the Loan Officer at his work and they direct me to waive their mortgage financing contingencies. BAD MISTAKE.

Two or three weeks later, when that same loan officer tells those same buyers that the underwriter denied their loans, it is too late. The protection of that contract provision is long gone and, in the worst of situations, so it that Buyer's earnest money and dream of buying that dream home.

The loan officers, like D-Day in the 1978 Film Classic, Animal House, essentially say [don't] "spend your whole life worrying about your mistakes! You f----d up - you trusted us! Hey, make the best of it!"

When a loan officer tells you your loan is approved, she is quite often trying to tell you "I completed your loan application - or at least most of it - and the computer software my company uses tells me that you are credit worthy. Now let me just send to this on the underwriter who will actually decide whether or not you can get your loan."

Which is why those four words make me shudder, every time I hear a loan officer utter them; Your Loan is Approved."

It goes without saying that most home buyers cannot proceed with their transactions without a mortgage loan. We are dependent on our loan officers and processors to help us either obtain the necessary financing or to at least notify us in a timely way that we need to "eject" from a contract if the loan is not going to be approved.

So why do they do it? who knows. Does it serve their clients? Not at all. Is there recourse? Almost always, no.

Whats a buyer to do? Trust nothing that is spoken, demand a written loan approval in writing.