It’s a seller’s market. With prices skyrocketing for even modest residential properties, young couples who have located the ideal first home may find themselves in a bidding war at the very first open house. But in the midst of the frenetic bidding, how is a seller to determine if the young couple has bid above their means?

The pre-approval process, whereby buyers secure a commitment that a lender will give a loan to them once they find a house, always has been a sound option for borrowers. But in today’s market, houses are put up for sale and within minutes, notices are sent via e-mail to potential buyers, leaving little time to gain more than a pre-qualification.

“Pre-qualification is merely a snapshot of the type of loan for which a person can qualify. It is not run through our underwriting process,” said Tonya Baltimore, spokeswoman for Fannie Mae.

Recently, however, Fannie Mae has worked with a local company to develop a pre-approval process available over the Internet.

Leader Mortgage Co., of Arlington, the first in the nation to go live with the idea, launched the Instant Pre-Approval program on its Web site on Oct. 27. Fannie Mae is currently working with another group of six to eight lenders in a different Web-based platform.

According to Baltimore, the pre-approval program through Leader helps both sellers and buyers. “It allows borrowers to know exactly what they’re dealing with, exactly how much they can spend. Then they begin their search for a home,” she said.

‘Comfort Level’

As of last Thursday, 11 people had entered Leader’s new site and eight received pre-approval, according to Sushil K. Tuli, chairman and chief executive officer of Leader.

“The whole process takes less than 15 minutes, and that’s including running a credit report,” he said. Once the customers are approved for a loan, which can range from $40,000 to $650,000, they receive a letter they are able to print out and take to the real estate broker to make an offer on a property, he said.

“This process provides them an edge over homebuyers who have not been pre-approved and gives the real estate broker and the property seller a comfort level that the homebuyer has been pre-approved,” Tuli said.

Leader Mortgage’s Instant Approval is powered by Fannie Mae’s Desktop Underwriter, said Baltimore. The underwriter has been available since 1996 and a new Web version was released in June, she said.

“What we’ve done is linked up with Leader Mortgage and provided the technology behind the scenes. Leader Mortgage will use our engine. It’s our technology that makes it possible,” she said.

A Leg Up
“I think there’s just a real strong corporate philosophy to embrace technology at its most cutting edge,” said Maureen Wattley, who serves as Fannie Mae’s customer account manager for Leader Mortgage.

“He [Tuli] can leverage all our technology and expertise. It makes sense for him and for us,” she said. Baltimore added that Leader was the recipient of Fannie’s 1998 Technology Leadership Award.

“This service has been available to lenders since 1996 [through Fannie Mae] and most of the lenders use this service now. But [the Leader Mortgage program is] the first time it’s being used as a pre-approval to the public,” said Tuli.

Visitors to the site will be taken through five screens in order to be pre-approved, said Tuli. The visitor must provide a credit card number and the site is secured by VeriSign of Mountain View, Calif., a provider of secure electronic commerce and communications. Although the approval is valid, it is subject to verification of certain items such as employment, said Tuli. Leader also plans to add the use of digital signatures to the service by March, he said.

One customer, David Moschella of Boston, said he used the service for two reasons. “I liked the idea of doing it online – I hate doing paperwork,” he said.

Tuli estimates that more than 50 percent of customers still don’t get a pre-approval before they go to a broker.

“I assume that in today’s market, anything that gives you a leg up on the competition can be good,” said Moschella.

“Borrowers are going to benefit from our pre-approval service. It’s easy and quick and similar to obtaining an actual mortgage, except for the fact that the lender will not be evaluating a particular property,” Tuli said.

Mortgage Leader First to Offer Online Pre-Approval Program

by Banker & Tradesman time to read: 3 min