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We want to be ready to buy a home if we see one we like this spring, so I called my bank to see about getting a pre-approval letter (heard that's the thing to do).
The bank rep was very helpful, but emphasized they could only offer a pre-qualifying letter. He said in order to get pre-approved, we'd need to find a property and get it appraised (in addition to submitting all of our documents, etc.)
This find the property and get it appraised before you get pre-approved is news to me. Seems to take the "pre" out of the equation.
He said it would take 2-3 weeks to get the approval once we had a house. I said I was concerned that if another buyer had a pre-approval letter, their offer would carry more weight than ours. He said he'd never heard of a pre-qualifying letter being a problem and if we put down 10k earnest money, it wouldn't be an issue.
Anyone hear of this? Is this something new? I'd like to do business with my bank, but this seems bogus.
(FYI, great credit rating, plenty of cash, over-the-phone pre-qualify he said we were at 18% based on how much we had vs. how much we wanted to purchase.)
That sounds odd to me. We do pre-quals and pre-approvals. Pre-approvals can be done without a property address, hence being a "pre-approved loan" - so you can start shopping and making offers.
Nothing new to me - normal for my area anyway - people that say they are pre-approved are generally confused - in my area some banks don't even label it pre-qualified anymore either - they simply supply a loan status letter saying you have supplied the bank with some basic info and have been instructed what range is realistic to work within - getting the pre-approval requires knowledge of property taxes, special assessments HOA dues, etc.
It depends on the lender or broker your dealing with, when I was a loan officer, we would speak to prospective homeowners looking for a pre-approved.
We would run their credit and ask for current pay stubs, we would respond with a letter stating "in reviewing the credit and current income, they would be qualified for a certain loan amount".
Word of advice - when you find your home, you want to barter (negotiate) the price down.
First thing you need to be awear of, Realtor's will be "Sizing" you up as soon as you start talking with them. They will be counting the "$" signs on their commission. Be careful how much information you give them. If you have your own lender, it's none of their business asking you any financial information.
You make three offers, a Realtor is requires to present all offers to the seller. Your first is really low insulting them, like 60% of the selling price. You are telling them you are interesting, you are asking if they will lower their price.
They come down, and when you are ready to make your second offer. Telling them you are really interested. You do a walk through inspection. You offer 50% (1/2) for your second offer of what they reduced the price down to, mentioning you want a home inspection.
The sellers come down again and now your are ready to have the home inspected. You will have to pay for the inspection, believe me it is worth it because it will turn up a lot of things that need to be addressed.
Now you are ready to make your third offer which is 50% (1/2) of what they lasted lower the price down. Say you are ready to go contract and at this point you give $100 to $500 earnest money for them to take the home off the market.
Remember no one is going to hold your hand, unless you ask for a lower price, you are not going and breaks. Right now it is a buyers market out there. I hope my advice works for you.
Another piece of advice looking for a home. You can really get great deals buying direct from the home owner. Check out forsalebyhomeowner,com web site.
I had a letter from my lender saying that I was approved for a loan of x dollars. That was part of the reason the seller accepted my bid. I thought this was a common practice.
Thanks everyone for the insight. So assuming my bank is just being odd, does it make any difference who I get the pre-approval letter from? Do people shop for pre-approval or do you just get it anywhere and shop when it's time to get the actual mortgage?
Thanks everyone for the insight. So assuming my bank is just being odd, does it make any difference who I get the pre-approval letter from? Do people shop for pre-approval or do you just get it anywhere and shop when it's time to get the actual mortgage?
Yes shop around, No your bank isn't just being odd. The 2 terms sound very similar but there is a HUGE amount of space in their meanings.
Banks (at least major/conservative ones) are going away from "Pre-Approved" anything from a language standpoint. Government regulation is encouraging that in some venues (new CRA criteria), and mandating it in others (CARD act, etc).
Consider this. The old "buyer ready" Pre-Approvals were good for 90 days (in most cases), were based primarily on credit score/history, plus what you told the Lender what you made and a ballpark DTI. Think about how much can change in 90 days that would effect these factors. And if it did change, the UW would decline the mortgage when they got their hands really into it anyway. So Pre-Approved never really meant Pre-Approved anyway.
A Pre-Qualified letter really means the same thing so you should be able to operate with it.
Approval = underwriter has approved your application to purchase a specific property.
FWIW, a loan commitment (ie, what many banks call an approval) can only be issued after review of the buyer's qualifications AND the collateral (the house) is shown to be satisfactory.
Until a loan commitment has been issued (and these days, until the loan has closed), the underwriter reserves the right to amend their approval in any of the earlier stages. Read those approvals closely, many have a "must be saleable in the secondary market" clause. Also, almost all loan commitments contain an addendum with the conditions of the loan approval. Turning in one of those conditions can trigger another conditiion. Example: you turn in a current bank statement and there is a counter deposit of $10,000. That will trigger a requirement for you to document the source of those funds.
In the past, our industry would have been horrified (I still am to some degree) that an additional condition or requirement was added, if not related to an original condition. It's not overly common, but it's happening - it's too much of a hardship for a bank not to keep that loan saleable. If a small broker has to buy back a loan (or two or three), they may be forced out of business.
This is where an individual loan officer's name in the community means everything. A loan officer with a solid reputation in the community will see their borrower's offer accepted over a no-name individual, hands down in my market. Also in my market, the big box banks have a terrible reputation for getting deals closed on time - so much so, some are paying their loan officers more on each loan to compensate them for additional heartburn - pre-approvals from them are regarded about the same as the "no-name" individual.
We shopped around for a pre-approval as we knew we wouldn't submit an offer without one. The one we ended up with said it was a "conditional pre-approval" and basically that meant they had not gone through the underwriting process, but had checked our credit and pre-approved us based on our incomes. We had a few of these conditional pre-approval letters made up with different purchase prices and down payments to use.
It depends on the lender or broker your dealing with, when I was a loan officer, we would speak to prospective homeowners looking for a pre-approved.
We would run their credit and ask for current pay stubs, we would respond with a letter stating "in reviewing the credit and current income, they would be qualified for a certain loan amount".
Word of advice - when you find your home, you want to barter (negotiate) the price down.
First thing you need to be awear of, Realtor's will be "Sizing" you up as soon as you start talking with them. They will be counting the "$" signs on their commission. Be careful how much information you give them. If you have your own lender, it's none of their business asking you any financial information.
You make three offers, a Realtor is requires to present all offers to the seller. Your first is really low insulting them, like 60% of the selling price. You are telling them you are interesting, you are asking if they will lower their price.
They come down, and when you are ready to make your second offer. Telling them you are really interested. You do a walk through inspection. You offer 50% (1/2) for your second offer of what they reduced the price down to, mentioning you want a home inspection.
The sellers come down again and now your are ready to have the home inspected. You will have to pay for the inspection, believe me it is worth it because it will turn up a lot of things that need to be addressed.
Now you are ready to make your third offer which is 50% (1/2) of what they lasted lower the price down. Say you are ready to go contract and at this point you give $100 to $500 earnest money for them to take the home off the market.
Remember no one is going to hold your hand, unless you ask for a lower price, you are not going and breaks. Right now it is a buyers market out there. I hope my advice works for you.
Another piece of advice looking for a home. You can really get great deals buying direct from the home owner. Check out forsalebyhomeowner,com web site.
Good Luck.....
I didnt understand fully the" 50%" counter offer, I will appreciate if you can exemplify with numbers
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