Saturday, June 16, 2012
With the low inventory levels in the Coachella Valley and multiple offers becoming more commonplace, buyers who want any chance in the bidding process need to provide a mortgage prequalification or preapproval ... and this should be applied for prior to looking at homes or engaging your Real Estate agent. Here in the Valley, most offers won't even be considered without one or the other. The low inventory we are experiencing makes timing a top priority to have any chance at having your offer accepted. Should you elect to search for property prior to meeting with a Lender(s), it is inevitable that you will come across the home that is ideal for you and the family and one of three things can happen: A) Every other Buyer and Agent at that price point has fallen asleep and you have your offer received because you have plenty of time to comply with paragraph 3.H.1 of the CAR 'California Association of Realtors" California Residential Purchase Agreement "(1) loan Applications: Within 7 (or ___ days after acceptance. Buyer shall Deliver to Seller a letter from lender or loan broker stating that, based on a review of Buyer's written application and credit report, Buyer is prequalified or preapproved for any NEW loan specified in 3C above. (If checked, letter attached." B) You will come across the home that is ideal for you and the family and the Seller accepts an offer from someone else because they won’t know if you are creditworthy and why would they risk taking their home off the market for someone who is not credit worthy; and C) You will come across the home that is ideal for you and the family and after submitting all the required the documentation to the Lender, you discover that it is $5,000 the maxim you can qualify for. Each of these examples is intended to stress the necessity of identifying that the prequalification or preapproval is one of the most important steps in the process of home buying in the 2012 marketplace. Now, prequalified or preapproved? The difference is significant. Prequalifying for a mortgage is based solely on what you disclose to the loan officer or broker about your earnings, credit score and total assets, including what is available for a down payment. Prequalification can be accomplished on the phone, online or written as it doesn’t normally investigate all of the criteria that is required to issue a preapproval letter; and so, the prequalification letter normally states … Congratulations, based upon the information received, you qualify for a loan of $ xxx,xxx.xx at market rate. Please contact me when you have located a property. A preapproval, by contrast, requires borrowers to provide documentation of their income and their assets. The lender typically pulls your credit report and score and you submit nearly everything you will need for the actual mortgage underwriting: recent pay stubs & bank statements; Investment Account statements, including any/all pension; W-2’s; last 2 years tax statements, 1099’s and any other assets that could show you have the resources to buy and maintain a home. Some lenders treat preapprovals as an opinion on the person’s ability to borrow, not a guarantee to lend while a few actually issue what constitutes a commitment. Generally, borrowers need to have chosen a property and have it appraised before they can expect a firm commitment from a lender. Preapproval carries more weight when you go to negotiate a deal. It tells the Seller that you can take your property off the market in confidence because as long as we complete our contract requirements, I have the ability to obtain financing to buy your home. I will not waste your time nor cause you to lose another Buyer. Borrowers should ask the lender to provide a good-faith estimate on closing costs and fees along with the preapproval. Many will provide this only once you have a home under contract, but some will give you an estimate of those costs, said Sofi Cordero, a senior housing counselor with La Casa De Don Pedro, which works on affordable housing and neighborhood development in Newark. The preapproval letter should include the amount a borrower is qualified to borrow, as well as the interest rate the prequalification was calculated at; in addition, it should always include the loan officer’s contact information. Some letters may have an estimated monthly payment, however this is not as important as the loan term and the loan type i.e. Conventional, FHA, VA etc... If you receive a preapproval letter however can’t locate an acceptable property for some time, stay engaged with your Loan Officer. Provide them with update paystubs and bank statements so that they can update your preapproval letter. Make sure the preapproval letter specifically states the property address you are making an offer on and do not expect a letter to serve for more than one property. This is more important than you realize. It makes one think that it’s more of a prequalification than a preapproval. Give yourself the best chance – stay engaged with the process. As always – Keep the faith!