Ycart, Home Buyer in Vista, CA

How long is a pre-approval letter good for? What happens when you receive a pre-approval letter and your situation changes for the better...?

Asked by Ycart, Vista, CA Sun Nov 21, 2010

...when you make your offer? (More money saved, income raise, longer time at your job, etc...)

If we're not planning on getting in to a new home until next summer, is it a good or bad idea to get pre-approved now so we know what we qualify for?

We ran in to a lender who wouldn't even look at our paperwork or documentation to give us a ballpark figure unless we wanted to be pre-approved. The easy answer for us was to say no and walk away because we're new to the homebuying game and just weren't sure what to do.

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Answers

7
Steve Ornellas’ answer
Hi Ycart,

First, be aware that there is a big difference between a Pre-Qualification and Pre-Approval. If you are looking for accuracy void of surprises once you enter into contract you want to be Pre-Approved first. For the differences see: http://www.Steven-Anthony.com/GettingStarted


"How long is a pre-approval letter good for?"

A Pre-Approval is good for as long as all the variables that went into the Pre-Approval remain the same (i.e., income, debt, credit score, interest rate, underwriting requirements, etc..). A Pre-Approval is NOT a commitment to lend; it is always subject to the appraisal, clear title, and any documentation conditions the lender needs satisfied.


“What happens when you receive a pre-approval letter and your situation changes for the better when you make your offer? (More money saved, income raise, longer time at your job, etc...) “

Conditions that improve your financial capacity, as you list above, improve the chances that you will receive funding from the lender. If the positive changes are substantial you may be able to improve your rate (via a lowered Loan-to-value ratio or increased credit score).


“If we're not planning on getting into a new home until next summer, is it a good or bad idea to get pre-approved now so we know what we qualify for?”

ABSOLUTELY a GOOD IDEA! Here’s why:

1) You want your tri-merge credit report pulled and reviewed to make sure there are no mistakes and to allow your mortgage broker to suggest ways of increasing your score.

2) Do not assume interest rates will remain low. The goal of the Fed “QE2” program is to increase inflation, and if successful, will raise mortgage rates too! (and there is talk of “QE3” already). So, with the Pre-Approval in hand you are better positioned to react to this possibility of an upward trend in rates. For the sake of example, say you can get a single loan at 100% financing on a home that is $300K. Your monthly payment would be $1610 and you would pay a total of $277,362 in interest over 30 years. Now, let say you wait to buy and the best you can do is 6%. How much does that home once priced at $300K have to drop in order to have the same net interest expense? Answer: $58,320. How lucky do you feel?

3) Here’s an issue for the Buyer with moving forward and making an offer without fully vetting financial capacity: There are three primary contingencies that allow contract cancellation without the loss of the Buyer's deposit money; however, the cost for inspections and appraisals is a "sunk cost." This means the Buyer expends about $1,000 (Appraisal, Home, Pest, Chimney, etc.) that does not get reimbursed if they find out they can't afford the home or a debt/income "surprise" is later uncovered via the Lender’s Prior-to-Doc (loan docs) or Prior-to-Funding requests.


“We ran in to a lender who wouldn't even look at our paperwork or documentation to give us a ballpark figure unless we wanted to be pre-approved. The easy answer for us was to say no and walk away because we're new to the home buying game and just weren't sure what to do.”

Home buying is serious business. Get Pre-Approved now! Personally, I would suggest you only work with a mortgage broker/banker as they are the only providers that will provide a Pre-Approval backed-up with an Automated Underwriting Approval (DO/DU). More on this subject here: http://www.trulia.com/voices/Financing/I_m_Considering_buyin…

Best, Steve
1 vote Thank Flag Link Wed Nov 24, 2010
While a pre-approval letter is an important component to submitting an offer, at the end of the day, it is just a piece of paper. When I write an offer, I have a pre-approval letter written specifically for that offer. The language varies from lender to lender - but I feel having a letter with a current date is really important. It helps me put my client's "best foot forward."

It is a great idea to see today what you might qualify for, I would highly recommend it. I have several lenders who would be more than happy to tell you what you qualify for. Now is a good time to get your ducks in order and start looking at home values in areas you are interested in so that when you are serious about buying, you are informed and know what you are looking at. I spend many months helping clients come up to speed on the entire buying process so they know what to expect and can see value when it shows up at their door. By taking that time now, you will position yourself better for next summer.

Are you looking in Vista or somewhere else? I am 10 minutes away and would love to help steer you in the right direction. Absolutely feel free to drop me a line and you will be well taken care of.

BeachBrokerBill
AKA Bill Hays
DRE #01775528
(760) 525-8698
Bill@coastalhomesbybill.com
0 votes Thank Flag Link Sun Nov 21, 2010
If you have a pre-approval letter and your situation changes, your approval is no good. Pre-approval is based on the facts at that given time.

Homebuying game? Not sure what you mean. A home is your biggest asset and it's serious business. It's important you speak with an experienced lender (like myself) so you understand what you are agreeing to and what you can afford before you buy. Review your credit history so any items that need to be cleared up are done before you apply. Understand the cash reserves required by the lender so you are prepared. These are just a few things a new homebuyer should understand.

I would be happy to give you an "idea" of what you qualify for.

Cheryl Garner, Mortgage Expert
Fairview Mortgage Capital, Inc.
Email: cheryl@cherylgarner.com
Web Reference: http://www.cherylgarner.com
0 votes Thank Flag Link Sun Nov 21, 2010
You will need to ask your lender, but typically 6 months, and if your situation changes for the better, you may want to see if you qualify for more. Most lenders are willing to give you a ballpark as to what you qualify for, however without checking your credit, they can't give you an exact figure and without paperwork work can't do a pre-approval. However, you can even go online and use mortgage calculators to see what you would probably qualify for. You can also figure that only 1/3rd of you income can be used for the mortgage. If you want to talk with someone, call Karen Barberio with US Bank, she is very helpful. 760-720-2449 and here is a link to a mortgage calculator. http://www.mortgagecalculator.org/


Let me know if I can help you in any way!


Joan Wilson (Realtor, SRES, Ecobroker, Certified REO, HAFA, and Short Sale Specialist)

Prudential California Realty
Direct Phone: 760-757-3468
800-975-7481 x 111
Fax: 760-946-7894
JoanWilson@prusd.com
License # 01341483

Blog: http://JoanWilsonRealtor.com

Find Your Dream Home:
http://JoanWilson.PrudentialCal.com
0 votes Thank Flag Link Sun Nov 21, 2010
You can get a good idea of what you qualify for by talking to a good loan officer. They will be able to give you an estimate of what you qualify for and what the monthly payment would be. If you are not going to get serious about buying until next summer you probably should not worry about getting fully prequalified now. You do not want to get your credit pulled unnecessarily and it is a waste if time.

I highly recommend Steven Tavera at Leading Mortgage Solutions 619-632-2190. He works weekends and will answer any questions you have. Tell him I sent you he does most of my loans.

If you have any other questions please feel free to contact me, Thanks Ever.

Ever Eternity
REALTOR
Phone (530) 448-3867
Fax (619) 819-9923
http://www.EverSanDiego.com
E-mail eversandiego@gmail.com
0 votes Thank Flag Link Sun Nov 21, 2010
If your situation improves, you can get a better approval. However, if you aren't planning to buy until next summer, you should wait until you are closer to buying. The letter is generally good for about 30 days though I usually get a letter specific to the property that we are making an offer on. No need to show your hand to the seller if you can afford higher than what you are offering, right?

Good luck!

Diane Conaway, RE/MAX United, (760) 749-2888, Lic. #01207791
0 votes Thank Flag Link Sun Nov 21, 2010
that should be written on the pre-approval, as to it's expiration date. Most that I know if are 3 months. If your situation improves, it's very likely you might be preapproved for more.

Typically, preapproval is free, with zero obligation to the lender. The only thing it does is 'ping' your credit when pulled, and you don't want to be doing that every three months.

So you might want to get a pre-qualification until you're closer to purchase (which doesn't involve pulling your credit, but should give you a general range of what you can afford), and any lender worth his salt can give you one of those at no charge as well. And when you're ready to buy, you can have them convert that to a pre-approval.
0 votes Thank Flag Link Sun Nov 21, 2010
Alan May, Real Estate Pro in Evanston, IL
MVP'08
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