Have you been pre-approved or just pre-qualified for a loan?  There is a huge difference and the difference between the being prequalified and preapproved could mean the differcent between successfully closing on a home purchase or being another statistic.    Did you know that in 2009, 50% of contracts to purchase a home did not close, and the majority of the time the reason was the buyer could not secure a loan?

Many homeowners and future homeowners think that if they have talked to a loan officer on the phone that they have been preapproved.   If all you've had is a phone conversation, most likely you haven't even been adequately pre-qualified.   Even a basic pre-qualification should include pulling a credit report and providing basic income and asset information to the loan officer.

In this age of strict loan guidelines, getting into contract and not being able to secure a mortgage may just be a referendum on the qualify of the loan officer and real estate professional you have selected.  Sometimes the loan officer or real estate professional are selected because they are family or friends.  This may not be the best criteria for a selection.  

Selecting a competent loan officer is a crucial part of getting prepared to purchase a home.   Even though you have easily purchased a home in the past, many guidelines have changed that may mean you won't qualify this time.   Unlike in times past, securing home financing is more than having a job, a good credit score and a down payment.   A couple of tips that will let you know whether or not you have selected a competent loan officer:   Did they ask you up front to provide your last 2 years of tax returns?  Or did your loan officer complain about the complexity of the new 2010 Good Faith Estimate?

If the answer to whether your loan officer requested your tax returns up front is NO, it is time to look for a new loan officer.   Your tax returns are scrutinized by the loan underwriter and the information on the return could change your qualifying income. 

If the answer to whether your loan officer complained about the new 2010 Good Faith Estimate is YES, it is time to look for another loan officer.  The new RESPA rules on the Good Faith Estimate have swung hugely in favor of the consumer.   Some of the Good Faith Estimate fees have no tolerance for change.   Other fees can only vary upward a maximum of 10%.  The loan officer has one chance to complete the Good Faith Estimate correctly.   If it is not completed correctly, your loan officer could find themselves paying to get your loan closed.  And if the loan officer has to pay personally, he may just decide not to complete your loan at all.  Then you will be dealing with either the disappearing loan officer or hearing suddenly that your credit isn't any good, etc. etc.

If you are looking at properties and your real estate professional has not insisted that you get a full preapproval from competent loan officer, it is time to select another real estate professional.   Real estate professionals are only paid if you purchase a home since they work on 100% commission.  The "true" real estate professional is not going to want to spend time and money taking a potential home owner out to look at properties without knowing their potential home buyers are preapproved with a target purchase price determined.

In this new age of home financing, some of the large banks are no longer issuing preapproval letters, only prequalification letters.   This is because most lenders are no longer doing a manual credit underwrite of a loan file unless the buyers are in contract to purchase a home.  This down-grading of the level of qualification gives banks "an out" if you are unable to secure home financing with them. 

Be sure to ask your loan officer if they have run your information through the Automated Underwriting System (AUS).  Lenders will require that the findings from the AUS come back with a finding of Approved/Eligible.  If the AUS does not come back with that finding, stricter loan guidelines will apply.  Some loan officers will not run your credit file through the AUS because there is a cost involved.   Go ahead and ask to see the findings if you are unsure that AUS has been run.   Just know that the system giving the Approved/Eligible finding is based on the information provided.   If any of the information input into the system is incorrect, the AUS will be re-run with the corrected information and the findings may change.

Again, selecting a competent loan officer is a crucial part of making your home buying process successful.  So take your time, do your due diligence and find a person that you trust to help you with the largest purchase you may ever make.