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Old 04-16-2011, 01:18 PM
 
27 posts, read 96,807 times
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Hi Everyone:

So I am closing on a short sale home and in escrow. I am 11 days in the loan contingency period (17 days per sale contract) and the seller’s lender will request that I waive the contingency next week. I asked my loan broker at what time in the current process will I receive an official document from the lender indicating I am approved for a loan and therefore I should fill confident in waiving my loan contingency.

I received yesterday a 1 page document that shows the amount that I am borrowing, sales price, property type and other general information about the home. This document also has 10 listed items that are printed below a larger heading “APPROVAL CONDITIONS” with abbreviations PTD and PTF next to it. Some of these conditions have in parenthesis (by LENDER). Other conditions have by BORROWER.

So my question is what exactly should I expect to receive from the lender broker indicating to me I am approved for a loan so that I can feel somewhat comfortable with waiving the loan contingency? My credit is strong. I will put down 20% for a 30-year fixed rate mortgage. My income is adequate to cover the PITI and I have no prior debts.

I posed this question to my lender broker. He indicated as of yesterday I am responsible for addressing 3 of the 10 conditions (home appraisal report pending in a few days, copies of deposit checks and paper trail for these checks, and signing a declaration that I have not obtained any additional debt other than what was disclosed on 1003). He went on to further explaining the lender may require additional conditions later based on new information obtained. He told me I am the only person that can make the judgment call to waive or not waive the loan contingency. I totally agree and I understand there are other parties responsible for meeting the conditions (lender and escrow company), but I do not want to be waiving the loan contingency if I don’t qualify for the loan. Am I making a mountain out of a mole hill?
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Old 04-17-2011, 01:51 AM
 
Location: Laguna Niguel, CA
768 posts, read 4,231,187 times
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17 day financing contingency, sounds Californian.

You are right to be concerned about the contingency, as waiving it prematurely can result in you not getting your earnest money back if you are unable to qualify for the mortgage (any part of qualifying, like you seem to understand).

The list of conditions your loan officer has provided are what the underwriter needs to review & find satisfactory. As long as you have the paper trail for the deposits, and they are from an acceptable source, then from what you listed the appraisal probably is the biggest item.

When the appraisal is completed, it still needs to be reviewed by the underwriter, and afterwards then the underwriter will accept it's value and need nothing further or may require additional data (comparables, etc.) to support the value, and sometimes they can even slash the value (although that is rare these days, typically the appraisal either accepted or declined).

I haven't seen your file, but I suspect that once the appraisal has been reviewed by the underwriter & signed off, your loan would be pretty close to the finish line. If your financing contingency removal date has arrived and the appraisal still hasn't been reviewed, as long as the seller has been informed of the loan progress and the appraisal has been completed, in my experience they often will extend the financing contingency period. If they have no clue what is going on, not likely they'll permit extensions to your contingencies.
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Old 04-17-2011, 09:57 AM
 
27 posts, read 96,807 times
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Hi Shane:

Thanks for the input. Yes indeed it is Los Angeles California.

Yesterday we met with the home appraiser. The loan broaker indicated to me that they put a rush on the report so I hope to read it by tomrorrow. I should also get copies of the deposit checks tomorrow from the bank. As to the paper trail is there more than simply photo copies of the deposited checks I need to provide for the paper trail?

Thanks
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Old 04-17-2011, 01:29 PM
 
Location: Laguna Niguel, CA
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Welcome. Depends on where the deposits are from, if they aren't payroll checks then you should also write a letter of explanation to explain the source of each one/why it was received.
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Old 04-17-2011, 06:25 PM
 
Location: MID ATLANTIC
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Quote:
He went on to further explaining the lender may require additional conditions later based on new information obtained
Let's say those checks were the 20% from your folks....that would trigger a requirement for a gift letter and donor's ability to provide the gift. Since you are a conventional loan, your file will be undergoing a soft pull credit report. It doesn't view the scores, but looks for inquiries, increased credit balances and new accounts. If any of these resulted in new debt, a new credit report will be pulled and the file re-underwritten.

I've been burned lately by appraisals - so my next comment is prejudiced. From what you have discribed of your situation, I'll hazard a guess that unless your funds cannot be properly sourced, the biggest potential for a problem is your appraisal.

The words, "no problem" should never be uttered in this industry again. Only you can decide if your comfort level is strong enough to remove the finance contingency. However, you need to be very clear that only means the credit side of the equation and not the collateral side. All states are different and if the language in the removal of the contingency is not clear enough, don't sign it. Tell your agent you still want language that the appraisal contingency still exists until the report is received and underwritten by the underwriter.

Absolutes don't exist, and should someone give you one, that's your clue to pay close attention to detail, because they aren't watching for you. Your loan officer is watching out for you and not providing false assurances.
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Old 04-18-2011, 07:13 AM
 
27 posts, read 96,807 times
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Thanks Shane and Smartmoney.

Smartmoney - "However, you need to be very clear that only means the credit side of the equation and not the collateral side." Can you elaborate on this comment?

Also when or what are the indicators that the underwriter has underwritten?

Thanks
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Old 04-18-2011, 08:47 AM
 
Location: Laguna Niguel, CA
768 posts, read 4,231,187 times
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After an underwriter has reviewed they update the conditional loan approval that you initially received.
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Old 04-19-2011, 08:19 AM
 
27 posts, read 96,807 times
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Hi Shane:

So I should expect an updated loan approval and conditions document? And this will indicate that the underwriter had underwritten?

Thank you
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Old 04-19-2011, 09:00 AM
 
Location: Laguna Niguel, CA
768 posts, read 4,231,187 times
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Yes, every time a loan officer/processor submits a batch of documents to the underwriter, the underwriter reviews within their current turn times, and then afterwards will update the conditional approval by initialing/signing off whichever conditions those documents satisfied, and if upon review it spawned and new conditions those would be listed on the updated conditional approval as well.
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Old 04-21-2011, 06:35 AM
 
Location: MID ATLANTIC
8,441 posts, read 21,747,140 times
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All mortgages have two parts to the equation, or loan approval: borrower's qualifying and property as collateral. Imagine a scale - each has equal weight in the approval.

Some of the financing contingencies in purchase contracts only refer to borrower's credit side of the approval...........some contracts are referring to the entire loan applicaiton, borrower and appraisal. You should find out what your contingency refers to.........ask your agent if the language is unclear or if you are sstill unsure. Ask him or her, "when you say remove the finance contingency from the contract, do you mean just my ability to borrow, or, my ability to borrow and the appraisal?"
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