Lending Process In The Real Estate Market 2021 | With Jason Cota | REAL ESTATE TALKS By Jared Jones
Everybody Jared Jones with Jones group real estate wanted to introduce to you someone who's been a major ally for me in this marketplace where we've had buyers, absolutely frustrated, uh, with the process, trying to get their offers approved, dealing with multiple offers and buyers are in the same exact fix, no matter how strong of a candidate they are. I mean, you have buyers that have great credit, a lot of money down, they're still getting beat out. And so the topic of the day that we really kind of wanted to drill down on is, is the tools that we're using to try and outpace the competing buyers because when you fall in love with a house and you've spent 30 minutes inside of it and you really love it. And you know, it's right for you in every way to have the process go through days and days, of, you know, the competition piece and then get beat out and start this over again.
It's totally an emotional drain. We found, obviously, some buyers will end up quitting the process. And so, you know, Jason's been around for a long time. I've worked with Jason for years now. And, you know, we've kind of keyed in on specific things that, that we've done that we're trying to particularly do differently to stand out in the marketplace and, and help our buyers avoid the rollercoaster ride of, of what really, you know, in a lot of marketplaces, most likely coast to coast. These larger Metro areas, it, isn't almost an imperative that you are going to face dramatic competition and who you partner with, particularly in lending field matters as it relates to being effective and competitive and getting into this, uh, environment, getting through it, and not having to pass on a home that you really love. So, so with that, I want to, I want to kind of shape this question to you, Jason.
I know, you know, passing as we kind of work together with our buyers, there are several things that I know is kind of a key that, that you're able to do, a little different with the programs and things that you're offering that enable us to have a higher level of competitive advantage when it comes to offering tables. So kind of walk me through what you would say, Hey, these are some real key areas that we're focused on right now and making sure we're educating buyers and helping them kind of get through this gauntlet, of getting an offer accepted. What would you say to that?
Yep, sure appreciate being here. And you have an ear for this type of market, you know, I think the first thing that clients can be aware of or look out for is the difference between a pre-qualification and a pre-approval. You know, when you go out, you want to set yourself up for success and be able to convey the strength of your offer and financing to the other side. So really quick, just on that, the pre-qualification is a lender when they speak with their clients, initially just the initial information that they give them. Are you employed? How much do you make, what is the range of your credit? How much do you have set aside without their vacation? That will be a pre-qualification then the pre-approval is actually where the lender, reviews the documents, and the information to verify what you've submitted on your application, that credit report what's on there, your pay stubs, W2's financial assets, and, uh, and such.
So that would be the first thing that we'll look out for. Do you always want to have a pre-approval to put yourself in the best position to have that offer accepted, but additionally, for you yourself to know definitively what finance options are available to you and become educated on those. That's the number one complaint in this industry is things changing on consumers, you know, fewer amounts of change will occur when you actually have a full pre-approval. So that would be the first thing. I think where we Excel at that is the process that we have for our pre-approval with most lenders, you're going to have the loan officers such as myself or his or her team reviewing those documents that I'd mentioned, pay stubs, W2's bank statements, tax returns, and the team and the loan officer issuing that preapproval to the customer, which is great.
You know, a lot of good loan officers out there. I've done this for 16 or 17 years. So I, myself, and my team have a great understanding, obviously of guidelines and calculating income and such. However, we're not the final decision because that's always the underwriter. So where I think a lot of, consumers run into frustrating situations and miss out on an opportunity is with most banks where your loan actually isn't reviewed until underwriter until you're in contract, it's a bit backward. so we actually do all the heavy lifting up front and there's, there are several benefits to that. But in our pre-approval process, we have our underwriters, not only our team, but our underwriters going through those files, asking additional questions, to make sure without a question of a doubt, that when you go to write that offer your offer is as good as cash. That's probably one of the strongest benefits that we can provide to our clients and helping you and guiding them and writing those offers
Real quick, follow up. Okay. The two most common things that I hear from buyers, as it relates to this part of the process, cause I hear you saying like, there's a difference between prequalification, preapproval and buyers glaze over at this particular point, they were like, constantly I hear people in the marketplace, even though we know that it's in their best interest to do this, they say to me, two things, I want to find a house first. And number two, I want to protect my credit against the hits of actually that will happen when they talk to a lender. So to me on the front lines, I think I hear this from buyers more commonly in the marketplace. I'm sitting there thinking to myself like, like, I don't care if you're seven months away from wanting to buy a house, if you're going to do it, call the lender straight away, get a plan in place because this is not always an overnight thing.
In fact, it's never an overnight thing. And in most cases I'm not trying to add strenuousness to, it is much simpler with you than it is with probably a ton of other people that I've worked with. But at the same time that, you know, last-minute is, is always a danger for a buyer in ways they haven't even thought about buyers. Buyers can have their earnest money deposit, which is their $5,000 good faith deposit or whatever it is they put down to secure. The house can be in jeopardy because they have gotten into the game too late. Okay. So like in just looking out for the buyer, like this is a, it's not an event, it's a process and there's a difference and it's going to take a series of things coming into play, and it's in your best interest to get those checkups. But what would you say to a buyer says, you know what, like I added stolen the credit hits, or I want to find a house first. And what's like, the second question is what's behind that. When we constantly hear buyers saying, I want to find a house first, I don't want to get my credit pool. Is it, do you think that these people just really aren't that serious or that, that it's, it's something else having to do with their frame of looking at all this? Would you say?
Sure. No, that's, you're right. It's probably the most common thing that we hear, from buyers out there. You know, I kind of go back to something that I learned a while ago, uh, a goal without a plan is a dream. So if you don't have a plan in place, you know, it's tough to have that come to fruition. So you always got to start with a plan, which again, in this case, it becomes an application. Now the fear of having, credit pole, the negative stigma at the time behind that, I think comes from just in general, in the industry out there, knowing if I apply for a credit card, how it can impact my credit score, not wanting it to drop, you know, there are certain things in place for mortgage inquiries, auto inquiries and student loan inquiries that I think consumers aren't as educated on.
And the information is not as widely out there as it should be. So they allow consumers for this specific reason, to have their credit run, to enable them to be able to one, not just find out what you can qualify for. But secondly, to find out who is able to offer you the best financing, because from one lender to the next, you could be offered a different interest rate. You could be approved or denied. There's a number of different things that could change from one bank to the next, but additionally, for you to be able to shop and get a comparable or competitive offer for multiple banks, the credit bureaus allow for mortgage inquiries for you too, once you have your first inquiry poll to have a number of inquiries from other lenders, and only one of those inquiries will ultimately impact your score.
And it will not impact your score until after 30 days. That is your period of time for you to shop, to find the best financing for yourself, and compare from lender to lender. So it's not going to initially drop your score, which is the big part. Uh, secondly, it's not again, going to hit the credit for at least 30 days. Now, the good part about that is every mortgage lender's credit report is good for 120 days. So you might be two or three months out. The credit report we pulled today will not need to be repulsed. So even after that 30-day window has passed. The average drop in credit from that one inquiry is typically two to 10 points. Even with that being considered your credit for the sake of your purchase is not going to be impacted where you'll obtain a lower rate because of the inquiries.
So that would be my thoughts on the credit side of things. And again, waiting off till you find that perfect home to touch on that, you know, in this market, how competitive it is. So if you're not prepared and able to relay the strength of the offer to the listing agent and them in terms of the seller, you know, that home more than likely will pass you by, uh, you don't want to learn the hard way when it comes to that, but listing agents these days, they want to know how qualified the borrower is. A lot of times that can be with a cross qualification, which means they want to speak to your lender to find out what qualifications you have. They're going to ask for a pre-approval letter, all of those things are difficult to do without actually having the financing in place. And to assume that once you find that home, you can put financing in place within the same day, two days. What have you, that does add stress to the transaction that you met, that you met, uh, had, uh, spoken to earlier? You know, our whole goal is to remove stress from the transaction, having a goal in place and having the, and being prepared for that is what will remove stress from inherently somewhat of a stressful transaction in purchasing all there's this inherent stress involved. We try to minimize that as much as possible.
Awesome man. So do this let's, let's kind of walk me through maybe even kind of in a rapid-fire process of what would you say are some finer points of things that you would say would enable a buyer to be more competitive and will offer situation besides which is a great step. And I don't want to let me not walk away from one piece of what you've said already, which is super key is in the pre-approval process versus, the pre-qualification right. If you take the larger step and not just have a simple quick look from a lender, but you actually have a lender run, in detail your financial history and make sure that they get you a very good look, to make sure that that they're like look, and as long as nothing changes here, really good shape, as far as working centered, it's giving you financing.
One of the things that I don't want to step in front of you, something that might be a later point for you, but one of the things I'll tell you as a buyer if you're out there looking to try to put offers on property and you run to a competitive situation if you are able to remove your finance contingency and the offer you're going to do yourself, you definitely will stand out. Okay, by that alone, there's a high chance that, that the rest of the field is all using financing. And there's a high chance that every single one of them has, what's called a finance contingency, which tells the seller that the buyer wants to protect their earnest money deposit. In the instance that their loan is denied. It means that the buyer that comes out and says, I do not want the shield of a finance contingency stands out as saying, I have massive confidence that I'm going to be just fine.
Now, no lender, even with a pre-approval can guarantee, everything's going to go through because you might lose your job. Right. But, but if you were to really put all the chips down and pedaled down on winning an offer in a competitive environment, then you'd remove finance continuously. And I would tell you like, fight a guy like Jason, my corner. And he had already gone through my file and said, look, we've got, pre-approval ready for you. That I would be in a position where I wouldn't lack confidence putting a five or $10,000 deposit on the line with a finance contingency. Because I know like I didn't just cut the corner and not give them very much. And at that point, your straight gambling, right. You're just in a different field. If you're doing, you're taking risks of just having your credit pool by a lender and thinking you're okay.
And then, and then you really, you're at a position at the negotiating table. You cannot make some aggressive place to win a house you really love, at least not doing without potentially putting a lot of your cash on the line in case something goes wrong because that's going to be, I would tell you, that's one of the outliers of a strong lender to buyer, agent relationship and the particular buyer having the right partnership in this to win an offer situation. That's going to be one of the biggest ones that I could claim, but Jason kind of walked me through, some of the other things that you would say would play to competitive features when that when we're working with you, that we can actually get away within this crazy market we're in.
Yeah, sure. No. And I agree contingency time is huge. That's, that's a big part of it. And one of the ways that we do work with our agents and buyers on strengthening their offer because we do business the way that we do because of the heavy lifting is done upfront, the measure twice cut once we're able to give them that confidence. Some of the other things that play a role in our process that, you know, help and give advantage to our buyers is the ability to close a standard 30-day escrow in as little as 10 days. So that lets the seller know that you know, they're looking for their money as soon as possible. Your offer might be a bit more competitive than the next individual who needs 30 days to put together financing, you know because they're several steps behind you in that process already.
You know, advising on stronger earnest money deposit, you know, again, that goes back to showing the strength of your file, like had mentioned five to $7,000 and having confidence that your lender has put in the work done, the due diligence, you've worked with them and providing the documentation, they need to do their job at their level to relay that and be certain that there's not going to be a question of a doubt, the loan will close, assuming there are no issues with the property itself, that should leave. That should be the only, you know, intangible at that point in time. And then finally, I would say, you know, the fact that we reach out to every listing agent on the offers that are placed, that's something that we do to want to be able to build a relationship, hopefully, find out if maybe there's something that they're looking for that hasn't been offered yet.
Sometimes they're more than more willing to talk to a lender and just unknowingly and give up a bit more information than sometimes they will an agent when you're going through the negotiating process. But most importantly, to relay our process as we're kind of going through right now. So they can be assured what due diligence we've done on this. And know for certain that we've taken steps that were ahead of the game to relate to their seller, our buyers at this point in time are better than even the cash buyer that might be out there. You know, and I think that that's in large part, what helps us win these deals, especially in this competitive market.
Awesome. Jason, thanks for your time. I really am grateful for the detail that you went into and a huge, huge, huge, I mean that last piece, how you separate the fact that you're actually going to, you're going to call whenever an offer goes out in multiple offer situation and actually pre-sell how, how strong the client is. And, and even though they're getting financing, like the fact that the, that the seller's agent will get a representation of, of the fact that the person in charge of this buyer's lending is in great hands and that they're, you know, you've got a good system for making sure that, that it goes well and I'm on the listing side a ton that never happens. So that's, except from, from the very mortgage, that's a huge thing. I will tell everybody watching this, get in touch with Jason, we're going to make sure his information is on the footer of this video, but also at the end, we'll probably get a card in there, to where you can get his email address, a way of reaching out to him, if you have any follow-up questions or if you're planning to get into a purchase situation, he's in several different States.
So I don't care where you're moving to. If you're looking to buy a home, you're watching this in the United States. I want you to reach out to Jason first. If you've already gotten a lender's input and you want a great opinion, it's in your best interest to call Jason. And we're going to have his information here. Thank you, Jason, for all of your input. And we'll see everybody on the next one.
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