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Monique Achu, Home Buyer in Bedford - Stuyvesant,...

Is it usual to have a developer require you to be pre-approved by their preferred lender before they consider your offer?

Asked by Monique Achu, Bedford - Stuyvesant, Brooklyn, NY Mon Jun 20, 2011

I have already been pre-approved by the bank I'd like use to obtain my mortgage, however the condo developer is expressing that they want me to be pre-approved by their preferred lender before they consider my offer. I just want to know if this the norm these days when it comes to purchasing condos or new development condos?

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Dear Monique:

This is a common occurance.

Since the preferred lender will underwrite the loan they will be asking for the full monty of documentation such as pay stubs, tax returns, proof of assets etc. Their approval means they are ready to lend because you have passed their guidelines.

Bonnie Chernin and David Rogoff
Fillmore Real Estate Branch #19
2926 Avenue J
Brooklyn NY 11210
917-593-4068 – David mobile
646-318-5031 – Bonnie mobile
davidrogoff@fillmore.com – E-mail
0 votes Thank Flag Link Tue Jun 21, 2011
Builders often have a preferred lender since it is another income stream for them. Is the condo FHA approved? FannieMae or Freddie Mac approved? If not, then your pre approval may not be good for that condo. In that case you need their perferred lender to get you the mortgage. Often it is the bgank that gave the builder the construction loan. If the condo is an approved condo then let the builder know that if they want the sell, they will have to accept your pre-approval.
0 votes Thank Flag Link Mon Jun 20, 2011
It is not unusual . The developer will get a back up lender should your lender not be willing to lend on the project. Just because you are preapproved doesn't mean the project is approved. Second, the seller will have a clearer understanding of you true qualification to borrow
0 votes Thank Flag Link Mon Jun 20, 2011
Hi Monique,

This is not an unusual request. What they are trying to do is create a funding approval that will make it difficult to back out of your agreement for the reason of not qualifying for a loan. It basically, insurance for them that will make you a much stronger buyer in their eyes.

If you are uncomfortable with this arrangement you are within your rights to "respectfully decline" and move on to another builder. This act in itself may help them see the light and think better of their request.

It may be more helpful to have the identy of another builder that doesn't use this requirement and share it with them. Keep in mind, they really don't want to lose you as a customer, however, they are seeking the best way to keep you engagued.

Our recommendation is to invest some time contacting other companies prior to taking a stand. But be assured, there's nothing that says you have to abide by their silly guidelines.

Good luck,

Bill
0 votes Thank Flag Link Mon Jun 20, 2011
It is not the "norm" yet... but is very common.. with the onset of internet lenders anyone can print a prequailification letter than doesnt mean anything.

the key is to go the extra step with your lender and be pre-approved not just pre-quailified. This is when you take the step to gove your loan officer your bank statements, pay stubs and take that extra step towards quailification.

You can then ask the builder to waive their clause or worst case you have to get preqyailified through them but they cant make you use any one bank, you still have that choice.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Mon Jun 20, 2011
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