My Last post regarding this subject was back on September 15, 2009. Yes, I know that was just short of two weeks ago. But I think the importance of not being caught off guard by your lender is a good reason to touch on this subject quite often.
To many times I’ve seen another lender or mortgage broker tell a borrower that they have been “Approved” for a loan when they have only a Pre-Qualification or a Conditional Approval.
When a lender gives you a Loan Commitment it is usually labeled “Approved with Conditions”. It is this terminology that confuses most people. Though your loan has been “Approved” by a lender, there may still be some conditions that the lender needs to clear before they fund on a transaction. These may be income, or asset documents, or something other the lender needs to clear up.
When you present a Loan Commitment from your lender to your Realtor, in order to be sure that all conditions possible have been cleared, the only conditions listed should be:
o Earnest Money Agreement
o Title Report
o Appraisal to Support Sales Price
This way you, and your Realtor, know that your income and asset documents, and any other additional verification that the lender needs have been reviewed by an underwriter, and the only thing left to do is to go find a house.
Remember though that depending on how long you shop for a house, you may need to update income and asset documents, or provide additional verifications. During the home shopping period, it is important that you send a copy of any income statements, or bank statement received after obtaining the Loan Commitment to your lender so they can keep the Loan Commitment up to date and overcome any issues that may develop.
Not having a clear Loan Commitment, as noted above, can cause frustration in having believed that the loan was approved, only to find out that there is a condition or two that cannot be met. In the case of already putting down Earnest Money, this could mean the loss of that deposit.
When your lender tells you “Your loan is approved”, sit down with them and go over that approval in detail so you know exactly where you stand and what to tell your Realtor.
Is Your Loan REALLY Approved?
Via Jeremy Turner (Keystone Mortgage):
3 comments • Gene perez • September 25 2009 05:47PMComments
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Thanks for the post, good information, I guess I realtor that knows how to close a deal can keep on top of everything.
I always go with a full doc approval for my clients. From a negotiating platform this makes you as strong as a cash buyer.
So true. People seem to think a pre-qual is an pre-approval, and a pre-approval is an approval. Loan officers don't want to scare the person off, so they make it seem like it's all taken care of. Need to make sure (as a Realtor) of what the loan status really is, by getting a copy of the Loan Commitment.