Home Buying in 19149>Question Details

Nichole, Home Buyer in 19135

Why do you get pre approved first if when i heard the bank can turn you down for that amount after you found a home had inspection and so on ?

Asked by Nichole, 19135 Tue Mar 20, 2012

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Yes the bank can turn you down after issuing a pre-approval. The problem is that the person who gathered the information did not get all of the right information. As a loan officer I ask all of the questions that reveal all of the information that I need to make sure the loan goes to closing. Spending a little extra time upfront helps make sure that there are no surprises later. When I issue a pre-approval,I have checked to make sure that the borrower will qualify for the loan.

Regards,
Alan Openshaw
Cornerstone Lending Inc
Southampton Pa 18966
215 953 0800
cell 267 992 7276
VOTED BEST IN BUCKS 2010
NMLS ID 143960
1 vote Thank Flag Link Tue Mar 20, 2012
There are 4 basic things that a borrower needs to show a lender in order to get approved for a mortgage. Each category has so many what ifs and sub plots that each box can read as it’s own novel. In other words, each category has so many variables that can affect what it takes to get approved, but without further adieu here are the four categories in no particular order as each without any of these items, you’re pretty much dead in the water:

Income

You need income. You need to be able to afford the home. Without it, forget it! But what is acceptable income? Basically, it all depends on the type of loan that a borrower applies for. Jumbo, V.A., USDA, FHA, Conventional, Kentucky Housing KHC Super Jumbo? Let’s just say that there are two ratios:

First Ratio – The first ratio, top ratio or housing ratio. Basically that means out of all the gross monthly income you make, that no more that X percent of it can go to your housing payment. The housing payment consists of Principle, Interest, Taxes and Insurance. Whether you escrow or not every one of these items are factored into your ratio. There are a lot of exceptions to how high you can go, but let’s just say that if your ratio is 33% or less, generally, across the board, you’re safe.

Second Ratio- The second ratio, bottom ratio or debt ratio includes the housing payment, but also adds all of the monthly debts that the borrower has. So, it includes housing payment as well as every other debt that a borrower may have. This would include, Auto loans, credit cards, student loans, personal loans, child support, alimony….basically any consistent outgoing debt that you’re paying on. Again, if you’re paying less than 43% of your gross monthly income to all of the debts, plus your proposed housing payment, then……generally, you’re safe. You can go a lot higher in this area, but there are a lot of caveats when increasing your back ratio.

What qualifies as income? Basically, it’s income that has at least a proven, two year history of being received and pretty high assurances that the income is likely to continue for at least three years. What’s not acceptable?????? Cash income, short term income and income that’s not likely to continue.

Assets

For the most part this is fairly simple. Do you have enough assets to put the money forth to qualify for the downpayment that the particular program asks for. USDA says that there can be no money down. FHA, for now, has a 3.5% downpayment. Some loans require 20% down. These assets need to be validated through bank accounts and sometimes gifts. Can you borrower the down payment? Sometimes. Generally if you’re borrowing a secured loan against a secured asset you can use that. But rarely can cash be used as an asset. TALK TO YOUR LOAN OFFICER FIRST when discussing what’s acceptable?

Credit

Whewwwwwwwwwwwwwwwwwwwwwwwwwwww. This can be the bane to every borrower, every loan officer and every lender……and yes, to every realtor. How many times has a borrower said my credit’s good, only to find out that it’s not nearly as good as a borrower thinks or nearly as good as the borrower needs. Big stuff for sure. 640 is the bottom score (again with few exceptions) that lenders will permit. Below a 620, then you’re in a world of hurt. Even at 640, people consider you a higher risk that other folks and are going to penalize you or your borrower with a more expensive loan. 700 is when you really start to get in the “as a lender we love you” credit score. 720 is even better. Watch your credit!!!!! Check out my post:

Kentucky Housing VA FHA KHC USDA and FNMA all require 640 credit score!

Appraisal

In many ways this is the easiest box. Why????? Generally, there’s nothing you can do to affect this. Bottom line here is…..”is the value of the house at least the value of what you’re paying for it?” If not, then not good things start to happen. Generally you’ll find less issues with values on purchase transactions, because, in theory, the realtor has done an accurate job of valuing the house prior to taking the listing. The big issue comes in refinancing. In purchase transactions, the value is determined as the

Lower of the value or the contract price!!!

That means that if you buy a $1,000,000 home for $100,000, the value is established at $100,000. Conversely, if you buy a $200,000 home and the value comes in at $180,000 during the appraisal, then the value is established at $180,000. Big issues….Talk to your loan officer.
0 votes Thank Flag Link Sat Sep 7, 2013
You just need a better lender. Period. Make sure you do a lot of research on your loan officer, i.e. how many deals has he successfully closed and how many fall-throughs he's had during his career. If he's had them, ask what were the reasons. You need to arm yourself with all the knowledge, and you will therefore be empowered AND protected!
0 votes Thank Flag Link Thu Sep 27, 2012
We use a lot of variables to pre-approve people, like income, debt, and credit report. As long does variables dont change by the time you find a home you should be good. After you find a home the bank will make sure those variables didnt change negative. Some people loose their job in between or take more debt.......The last step is that the house needs to be valued at what the market price is, so when a offer is made by your realtor they should know if the value is there or not. No bank will give a loan on a property that is not worth the price. If need more explanation give me a call or e-mail me


Gabino Barrera Jr.
Mortgage Professional

SWBC Mortgage
23705 Crenshaw BLVD. Suit 101
Torrance, CA 90505
424-236-1655-Cell
310-891-1700-Office
310-872-5404-Fax

CA-DOC861438
License by the State of California Department of Corporations under the California Residential Mortgage Act
0 votes Thank Flag Link Tue Jun 26, 2012
The preapproval is based on preliminary information which will be completed during the full loan application process. The bank will be reviewing your credit with a fine tooth comb and also appraising the property. If either falls short, the deal may be in jeopardy.

Good luck to you,
Jeanne Feenick
Unwavering Commitment to Service, Unsurpassed Results
0 votes Thank Flag Link Tue Jun 26, 2012
Nichole, the reason most buyers get turned down after they have been approved is because they did not take the time to furnish the loan officer with all of the support documents needed to decision the loan. I estimate 30% of the “buyers” walking around in my town with a pre-approval letter do not qualify for the loan they are seeking. The LO pulled their credit report and asked them questions about income and never looked at a pay stub or bank statement, tax return, etc.

The reason you want to be pre-approved and have the LO review all of your docs before making an offer is so you do not lose money on inspections and an appraisal. Those are expensive mistakes if you can’t close the deal, good luck,
0 votes Thank Flag Link Wed Mar 21, 2012
Get away from the Banks on Any and all deals that are of conforming guidelines. Mortgage Lenders are more savy and have more to offer. If a deal does not fit inside an audited box, The Banks wants nothing to do with it ! So, The Mortgage Lenders can possible be the answer to change many products available and/or private loans, Brokered specialist products and local bank relationships on their portfolio products not advertised to the public.
0 votes Thank Flag Link Wed Mar 21, 2012
And the correct answer is Walid Muhammad now that I got my wise comment in he is right because most agents don't take the time to explane the difference, This is the reason as a consumer of real estate services you need to interview more then one agent to find one who is willing to ask DO YOU UNDERSTAND and not asume that all Buyers or Sellers understand or DO YOU HAVE ANY QUESTIONS. These basic questions stop all problems before they start.

Philip J. Cunningham REALTOR
V.I.P. Realty Corp
7942 Bustleton Ave
Philadelphia,PA19152
215-725-5700
0 votes Thank Flag Link Wed Mar 21, 2012
Nichole:

You get a pre approval to determine what price point you should be shopping in and to include in your written offer to the seller. List agents require a pre approval be included so that your offer is deemed viable. If you wish to be taken seriously by a buyers agent, a sellers agent, or a seller you need to be pre approved. It is in your best interest.

Once you have gotten a pre approval and have written an offer on a property that has been negotiated and accepted by all parties you are going to conduct a home inspection. If you are purchasing your house with a mortgage the bank also has the house appraised. At both the point of inspection and appraisal issues may come up that prevent a lending institution from deciding to invest in the property. They may decided the property is unsafe, or does not meet its financial criteria. Would you lend your teenager $5000.oo to buy a car without you seeing it? No, and the bank works the same way. They want to be sure that their money is going to be secure.

You are in need of a knowledgeable buyers agent that will answer your questions fully and guide you in the home buying process. It does not cost the buyer to secure his or her own agent, the seller pays both agents from the agreed upon commission when a property is listed.

If you decide you want more information or if you decide you want a buyers agent feel free to contact me at anabarlow@gmail.com

Ana Barlow
Coldwell Banker Preferred
Philadelphia
anabarlow@gmail.com
0 votes Thank Flag Link Tue Mar 20, 2012
Pre-approval and pre-qualification are not the same.

From your question, it sounds like the buyer was pre-qualified. Pre-qualifications are normally based upon "stated" information to the lender.

Stated information is what it sounds like...the buyer told the lender various financial details without the lender receiving verifying documentation.

Pre-approvals are normally based on documentation submitted to the lender that will meet the criteria of the processor and underwriter.

This is a much stronger letter and assessment because the lender is basing the buyer's ability to afford a mortgage on the provided documentation.
0 votes Thank Flag Link Tue Mar 20, 2012
Hi Nichole, great question.

First a few reasons, then a comment on the bank possibly denying you:

1. No good Realtor is going to spend their time or gas to show you around if they do not confirm that you are qualified first.

2. It is not ethical for us to show other agent's listings if you are not qualified as it is an inconvenience to the Seller to be out of the house during showings.

3. Most importantly, it is a waste of YOUR time.

The trick to not being denied in the future is simple: ask your Realtor for a few names of REPUTABLE mortgage brokers who will give you an honest and realistic prequalification/preapproval. There are many different "verisions/types" of prequals/approvals.

Having ethical and trustworthy Realtors and mortgage brokers on your side is key. Hope this has helped!

Eric Axelson, Associate Broker
Kurfiss Sotheby's International Realty
Philadelphia | South Jersey | the Main Line | Bucks County
267.507.2287 direct
axelson@kurfiss.com
Web Reference: http://kurfiss.com
0 votes Thank Flag Link Tue Mar 20, 2012
This is part of the buying process that allows buyer to know their potential "buying power" when beginning a search for a new home. The process for buying a home also includes other factors which can choose to accept or reject based on their terms. Those factors include results of the home inspection, appraisal, and factors regarding the buyers income, job, history, credit etc. I suggest being completely open with the lender upon meeting with them to discuss the pre-approval so there are little to no surprises as your purchase moves forward. As a seasones real estate professional, I'd be happy to guide and assist you through the process to make your experience stress free and enjoyable for your new home!
0 votes Thank Flag Link Tue Mar 20, 2012
My husband and I was just turned down after a pre-approval letter. We were completele honest with the lender about a foreclosure my husband had in 2008. The lender even discussed the foreclosure with my husband, and we still recieved the pre-approval letter. We shop for a home and fell in love with the home but our loan was not approved because of the forclosure,nothing else, the same foreclosure that was known about prior to the pre-approval letter. Can anything be done about this? Nita bratz8@ymail.com
Flag Tue Jan 15, 2013
Because the seller (and agent) wants to know that you are a qualified buyer, otherwise they won't take your offer seriously.
0 votes Thank Flag Link Tue Mar 20, 2012
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