Even if you work with a mortgage broker before you start looking for a house and get preapproved, you may not ultimately be able to purchase the property of your dreams – and not because you cannot afford it. Just in the time it takes to find a house after getting preapproved for a loan amount, homebuyers are losing out when their mortgages fall through. Why? Because while preapproval software can give you a good idea of what you qualify for, it ultimately does not do the job of a real underwriter – and those underwriters, all too often, cannot see their way clear to signing off on the loans[1].

One mortgage broker describes the process of getting a mortgage as “a little bit of an art. It’s not black and white [and] it has to flow.” And with “major lenders…frightened out of their mind,” as David Olsen, president of Access Mortgage Research and Consulting puts it, “There’s zero tolerance for error.”

Currently, only banks that keep their own loans appear to be truly confident in their ability to get loans approved – small surprise since a lender keeping its loans will be able to say clearly one way or the other what types of loans it is willing to make. Banks holding loans can afford to be more “thoughtful” about their loans, explains Greg Garrabants, CEO of Bank of the Internet, which holds high-value, jumbo loans.

It’s understandable why many lenders are not lending, but do you think that standards need to changed? Is it a good sign that Bank of the Internet is making money holding its own loans?

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[1] http://www.loansafe.org/unpredictable-mortgage-approvals-frustrate-buyers-drag-down-market