Gilbert Real Estate Blog
~ by Randy Hooker of Dreamcatcher Realty
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Archive for November, 2010
LSR, Mortgage Loan Pre-Approval, Mortgage Loan Pre-Qualification – What does it all mean?
UPDATE: On February 28,2011, the Arizona Association of REALTORS® did in fact release the Pre-Qualification Form mentioned in this post. The AAR also retired the LSR. Here’s an update on the 2011 AAR Mortgage Loan Pre-Qualification Form.
In recent years the form used to document a buyer’s purchasing power and level of pre-approval has been the subject of much debate. The argument usually centers around the form’s inability to consistently and honestly communicate the true “approvability” of a home buyer. In Arizona, we currently use a form known as an LSR – Loan Status Report (Arizona’s standard mortgage loan pre-approval form) to communicate a buyer’s relative financial strength, type of loan product, loan amount available, creditworthiness, etc. This form is typically signed by the home buyer as well as his/her Loan Officer, and it’s imperative that a home buyer secures an LSR before starting to search for homes with his/her buyer’s agent.
However, more change is on the way! There’s a new form in the works that the Arizona Association of REALTORS® has proposed will replace the LSR. At this moment, it’s being called a “Pre-Qual Form,” and it covers the status of a buyer’s loan pre-approval in much more detail than the LSR. In concept, I appreciate the move towards implementing a more detailed form, but I really question the name of the proposed form.
Historically, mortgage loan pre-qualification meant nothing more than a verbal exchange of information, with NO credit reports pulled and NO documentation of income/assets. Anybody could issue a pre-qual to a potential buyer. Personally and professionally, I would much rather see the form called a “Mortgage Loan Pre-Approval Form.”
However… regardless of what fancy form we use, or what we call it, the crux of the issue still comes down to the character, integrity, experience and professionalism of the Loan Officer. In my career, I’ve experienced more flaky, inept and unprofessional Loan Officers than I care to count, but there have also been a handful of Loan Officers that I truly respected. As with real estate agents, where not all agents are created equal, not all loan officers and lenders are created equal. To coin an computer term, garbage in equals garbage out.
Bottom line >>> if a buyer has a trusted mortgage lender / Loan Officer in their corner, then their word, advice and pre-approval documentation is solid gold. It bears repeating – this issue will ultimately come down to the accountability and trustworthiness of the mortgage professional working the file.
Image courtesy of striatic.
