Brought to you by our friend Shashank Shekhar:
Q. Why do I have to obtain another Pre-Approval Letter from a different lender when I make an offer on a home?
Cross-qualification is imminent in certain markets, especially with bank-owned or short sale properties. Some of the large banks that own homes require any potential home buyer to be qualified with their preferred lender – who is typically a representative of the bank that owns the home. This is one way for the bank to recoup a small portion of their loss on the home from the previous foreclosure or short sale.
In other scenarios, the listing agent/seller prefers to feel safe in knowing the home buyer they’ve selected has a back up plan should their current one not work out.
Q. I was pre-approved, but after I found a home and signed a contract, my lender denied my loan. Is this a common trend?
There are literally hundreds of moving parts with a real estate purchase transaction that can impact a final approval up until the last minute, and then after the fact in some unfortunate instances.
With the borrower – credit scores, income, employment and residence status may change.
With the property – appraised value, poor inspection report, title transfer/ property lien issues, seller cooperation, HOA disclosures.
With the mortgage program – Interest rates can change affecting the DTI ratio, mortgage insurance companies change guidelines or go out of business, new FICO score requirements etc.
It’s important to make sure your initial paperwork is reviewed and approved by an underwriter as soon as possible. Stay in close contact with your mortgage approval team through the entire process so that they’re aware of any delays or changes in your status that could impact your final approval.
Q. What happens if I can’t find a home before my pre-approval letter expires?
Depending on your mortgage program and final underwritten conditions, you may have to re-submit the most recent 30 days income and asset documents, and have a new credit report pulled.
It’s important to know critical approval / condition expiration dates if your real estate agent is showing you available short sales, foreclosures or other distressed property purchase types that have a potential of dragging a transaction over several months.
Written by: Shashank Shekhar (NMLS ID 8176) is widely regarded as “San Francisco Bay Area’s #1 Mortgage Expert.” Shashank is the author of widely acclaimed books – “First Time Home Buying 101” and “Real Estate Unleashed” and highly rated mortgage blog http://www.LendingExpertBlog.com. He has been featured on Yahoo! News, Pen TV, KCBS Radio, SF Examiner and San Francisco Chronicle. He was recently ranked among top 25 most connected and “Top 40 Under 40? most influential mortgage professionals in the country by National Mortgage Professional Magazine. He is currently the CEO of Arcus Lending – a mortgage lender based in San Jose, CA serving the entire state of California.
Shashank can be contacted via phone at 408.615.0655 or via email at Shashank@ArcusLending.com.
Photo Source: Mortgage
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