> Was initially going to use a credit union but they
> were kinda weird, encouraging me to get a less of a
> loan than i was qualified for so as not to let the real
> estate agent think i had more money to play with.
>
> Uh... OK. So, I could have gotten a 340k loan but have
> me go with a 265k loan because somehow that's going to
> mean the real estate agent will show me 340k houses so
> i can bid 265k on them? I honestly don't understand that
> one...? Anyone have clue?
It's a two part process: the bank will run a preliminary check to see, based on your FICO score and your current situattion (other debt, income, etc.) to come up with a rough number that you can "pre-qualify" for: presumably that number is the maximum that, given what they know today, you'd likely qualify for actual underwriting. That is: a higher number would be turned down. Later, after your offer is accepted, the process is repeated (things might have changed) but a different question is asked: given the situation, will they loan you a *specific* amount of money?
So I think the idea there is that even if the bank says "Yeah, we'd let you borrow up to $340k" you might not necessarily want them to put that number on a letter to your agent, because then your agent might want you to look at more expensive places.
I think the credit union was offering to do you a favor.
And of course if the letter says 265k and you actually did fall for a place that needed a mortgage more like $320k, you'd have info in your head that they'd probably let you do it. Getting a revised number would be a question of calling them back up and saying: Remember when you said $340k and encouraged me to have $265k put on the letter? Well, now I need one that says $320k.
Even though a real estate agent has a legal/ethical duty to represent your interests, it seems prudent to not give them something they might use against you. Afterall, their comission is based on the purchase price ...
> the fact is, i just got a way better rate and terms with
> the local bank than with the credit union.
Congrats!
> somehow, I had it in my head that the banks want to put brakes
> on risk a lot more than it feels like they do.
On the one hand, this is sorta true. But on the other hand, we're in the middle(?) of one of the biggest and potentially longest housing slumps on record. Transactional volume is *way* down, which means that they have to be hungry. And someone who walks in with good credit and looks eager to buy makes you Customer Of The Month.
A friend of mine recently was contacted by his bank and offered an out-of-the-blue refinance on his mortgage to a lower rate, just for saying yes. He was a little shocked by this initially, but then the agent said that they have to do a certain number of refis in order to satisfy the government, and so they are cherry picking (my words, not the agent's :-) good credit scores to do them.
/jordan