American consumers are often quite familiar with the concept of pre-approval
for a variety of services. Credit card applications arrive in the mail
attached to pre-approved lines of credit. Vacation packages associated
with timeshares arrive pre-approved and only require confirmation of receipt
in order to book. However, not every pre-approved offer should be taken
advantage of and not every pre-approved offer is even a genuine offer.
There is a critical difference between preliminary mortgage approval and
pre-approved mortgage offers. Preliminary mortgage approval is simply
the first step in the home owning process. Pre-approved mortgage offers are often
defective mortgages waiting to be executed. More often than not, any documentation presented
as a pre-approved mortgage offer is full of terms far more favorable to
the lender than to the buyer. In addition, terms outlined in pre-approved
offers are not often as favorable as buyers could receive under other
Other problems with pre-approved mortgages include the fact that they are
not ordinarily reviewed by underwriting experts, their terms are not always
completely fixed and they are not subject to appraisal. Pre-approvals
are often drafted based on a broad profile of the potential buyer, not
specific and highly-researched credit checks and qualifications.
If your documentation has been prepared by a loan officer rather than an
underwriter, you are likely in possession of a pre-approved mortgage rather
than preliminary mortgage documentation. Your bank may not be willing
to provide you with more solidly drafted documentation simply because
the industry has moved towards more automated processing. As a result,
it is critical that you speak with an experienced attorney before you
sign any final documentation. Failure to address the holes in a potentially
defective mortgage now could make paying off your home much more complicated later.
If you are facing threats of foreclosure on a potentially defective mortgage,
it is also critical that you contact an experienced attorney. A strong
advocate may be able to help you keep your home and obtain some recourse
from those who took advantage of you originally.
Source: Forbes, "
Why Getting Pre-Approved For A Mortgage Is A Sham," Mark Greene