Show me your money
WHY HOMEBUYERS ARE OPENING UP THEIR MONEY LIVES
When you talk to a lender seeking a mortgage, you must reveal a complete picture of your finances, from how steady your earnings have been to whether you’ve accumulated credit card debt.
Such financial intimacy can be unnerving, but professional ethics dictate that lenders keep the information private.
Typically, all that real estate agents know about a buyer’s finances is what’s in a prequalification or preapproval letter. Agents ask buyers for these letters, which say how much they’d be able to secure in a mortgage, so that they home shop with serious intent.
These letters are roughly accurate, provided the potential borrower was honest with their lender, and doesn’t make any significant changes to their financial situation before buying, notes Neil Caron of Freedom Mortgage. Now, though, when multiple buyers are vying to purchase a home, it’s not uncommon for the seller’s agent to request to speak to a buyer’s lender for more detail on just how “firm” financing really is.
“We get these calls all the time,” says Ralph DiBugnara, a vice president at Residential Home Funding.
Before talking “we need (the borrower’s) permission,” Caron says.
Moreover, lenders shouldn’t be sharing specifics, like exactly how much a person earns, but only “broad strokes,” DiBugnara says. “I might say he has a ‘great’ credit score or a comfortable income-to-debt ratio.”
Especially when a buyer offers more than the list price, he needs a strong profile, because it’s possible he would need more in down payment or get a mortgage larger than indicated in the letter, DiBugnara says.
The amounts stated in these letters don’t always reflect the absolute limit a borrower has, Caron adds.
Most purchasers give permission, DiBugnara says. “They say, ‘Tell them everything so I can get this (home).’ ”
The exception is if buyers are still negotiating. “Then they might want me to say they’re strong, but nothing more,” so that sellers don’t know about a buyer’s ability to pay higher, DiBugnara says.