Undoubtedly you’ve heard about Quicken Loans’ new Rocket Mortgage by now. I don’t watch TV and even I have seen their ads. OK, I watch the news.
Quicken didn’t get to be the biggest lender in the country without very savvy marketing, and Rocket Mortgage seems magical…until it explodes. Here’s how to prevent yourself from becoming a casualty if you just can’t help it and you do apply for one.
Rocket Mortgage by Quicken advertises “it takes eight minutes to receive a full mortgage approval online.” From millennials to exhausted fortysomethings chasing kids and a job, who wouldn’t want to “simplify” their home-buying process this way?
But here are the facts:
- What they give you in eight minutes is really a conditional loan approval. Do you really believe that they’ll lend you $625,500 (conventional mortgage limit), without doing more than eight minutes of investigation on you…and the property?
- When the VA or FHA appraiser gets to the house, guaranteed, the lender will slap a bunch more “loan conditions” on. Conventional—not as many, but they happen. What? Your speed demon Rocket lender didn’t check with local appraiser sources when he heard you paid $100,000 over asking? The value came in low, and your loan got rejected? At the eleventhth hour? (These are usually witching hour occurrences.)True, ever since Fannie Mae’s and Freddie’s Mac’s Appraiser Independence Requirements went into effect, the lender can’t choose the appraiser; a lender has to go through an appraisal management company that independently assigns one. However, a really great flesh-and-blood lender will call up his/her appraiser friend and ask said friend to run some comparables to see if the house might appraise at or near the asking price…before the buyer spends $400 and waits two weeks to find out it won’t.
And this leads to negatives for many buyers:
- You go into escrow with the mistaken belief that you are totally approved. And if something turns up that the underwriter doesn’t like (which often happens three days before escrow is scheduled to close)—your rocket that soared in eight minutes? Well, it just crashed back to earth, landing on that little piece of ground that was supposed to become yours, making the seller (and you) Very Angry.
- Unhappy sellers won’t give you a second chance. Had you gone to a living, breathing lender, one you could actually talk to on the phone from the very beginning, that lender may have packaged your loan differently, anticipated hiccups, run your “preapproval” past a flesh-and-blood underwriter and approved you for a loan that would close. And you’d get that dream home you beat five other buyers out of.
The common misconception is that you will save money with an online loan. Well, you can save more money offline if you tell your loan broker what Rocket’s offering and ask if can he match or beat it.
So, if you must succumb to the temptation of a Quicken Rocket loan, at least submit a simultaneous loan application to a flesh-and-blood lender who was referred to you or with whom you’ve worked in the past. One who will level with you in the beginning and not regard you as a number but as a valued client who will return again and again and refer friends and family. It will give you a significant edge over your competitors’ offers because many listing agents don’t like online loan approvals.
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Cathy Turney has been a California licensed real estate broker (#01056789) since 1988, a state-certified appraiser (#AR008672), and wrote the American Business Association Stevie Award-winning book, “Laugh Your Way to Real Estate Sales Success.”