Home Selling in Midlothian>Question Details

Bellesheiml, Home Buyer in Midlothian, VA

Do you need to be pre approved to make an offer on a short sale home?

Asked by Bellesheiml, Midlothian, VA Sun Jul 8, 2012

I have 20% of asking price and am in the process of pre approval. Credit score is LOW (560) but am going pay off any debts for the pre approval.

Help the community by answering this question:


Most definitely!
Banks will not consider an offer without a pre approval and a proof of funds for your down payment. Often the bank who is approving the short sale will require you to get a pre approved with them so they know you are credit worthy.
0 votes Thank Flag Link Tue Aug 13, 2013
At this point, even though you'll pay off the debts, while it will improve your Debt to Income ratio (DTI),
it won't change your score, not right away anyway.

Consult your mortgage loan officer on how to improve your score - dispute erroneous info on each of the credit agencies reports, and do it within 5-6 monthly cycles. Keep your balance to limit ratio below 30% on all cards, possibly add your name to someone else's (family) cards to improve your score.

Some short sale lenders ask for the pre-approval, and some do not.
Some would want to see your Desktop Underwriter print out (DU).
Highly unlikely that you'll be able to get through DU right now - you got to be higher than 620 points.

It is also the job of the listing agent to check if you really qualify.
This is because the success of the whole deal is based on your ability to timely get a mortgage.
Often, short sale approval give too little time to go through financing - that means you truly have to do everything quickly (paperwork) and push the file through the underwriting quickly.

I'd suggest to first fix the credit issue, truly prepare for financing, and only then get involved in the purchase transaction. If you start now - it will be a risk for you and the seller both. Your risk is that you'll be doing an inspection (paying for it), appraisal (paying for it) etc. Seller's risk is that you may not get financing at all - and he won't sell the property.

Hope this helps,

Irina Karan
Beachfront Realty, Inc.
0 votes Thank Flag Link Tue Aug 13, 2013
Banks, from what I have experienced, will not even consider an offer if not accompanied by a preapproval or proof of funds. Also, I'd recommend that you do what's necessary to raise your credit score.
0 votes Thank Flag Link Tue Aug 13, 2013
In my experience most of the listing notes include instructions, form attachments and a check list of items needed to bid on a home. This is especially true with HUD or Fannie Mae Homepath properties. I have always had to provide proof of funds and proof of down payment eligibility with any foreclosure or short sale I have handled. This is much more common than not! Hope this helps!
0 votes Thank Flag Link Mon Aug 12, 2013
We just had a short sale bank ask for not only the preapproval but the verification of funds for the buyer's down payment and closing costs BEFORE they would even start the process. Get preapproved. Even though a short sale takes months, this is the the waiting period(being under congtract) you should be using to build your credit.
0 votes Thank Flag Link Sun Aug 11, 2013
Yes. Because a short sale offer, once accepted by the seller to submit to their lender for approval, MUST be accompanied by a pre-approval letter. No exceptions by anyone, ever. So there is absolutely no point to attempt to purchase a short sale with out the pre-approval letter.
0 votes Thank Flag Link Sat Aug 10, 2013
I would recommend getting your debts paid off before making any offers.
0 votes Thank Flag Link Mon Jul 9, 2012
Bellesheimi, technically no, you do not need a preapproval letter or verification of funds letter to make an offer on ANY property. However, the current owners of the short sale property are attempting to avoid a foreclosure (as is their bank/lender) and they will probably know that their lender will only consider offers accompanied by a preapproval and/or verification of funds letter.

A seller would be poorly advised to take their home off the market in hopes that the purchaser can obtain a preapproval letter. More to the point, why would a purchaser run the risk of losing a home to another purchaser who came prepared?
0 votes Thank Flag Link Mon Jul 9, 2012
Lenders use different credit scores for consumer loans than for mortgage loans.
Is the 560 a mortgage credit score or a consumer credit score?

Your best option is to contact several lenders and discuss your financial situation. A good lender will advise you as to what you need to do to raise your credit score.

The interest rates are great right now, but due to your low credit score most/all lenders will charge you higher interest rate. This is why it is in YOUR best interest to raise your credit score to at least 650.

You can qualify for FHA loan with 3.5% downpayment (0% down for VA loan, if you qualify). Perhaps paying off your other debt and taking FHA loan is a better financial decision. Also, there are lenders who might approve you for a conventional loan with 10% down IF your credit is closer to 700.

Vivianne Rutkowski
Coldwell Banker Residential Brokerage
0 votes Thank Flag Link Sun Jul 8, 2012
Pre approval is required for all purchases of any Real Estate. Just assk yourself.....would you except an offer for 200{ plus from someone that has no proof they can get the money? Of course not. When purchasing Real Estate you muat get serious and do things in order. Secure a financing commitment from a lender and then seek a Realtor to help you find a great property and make an offer. By the way, you don't have to buy a short sale to get a good deal. In fact, most of the time you will just get your hopes up and dreams crushed when the deal falls apart. Best case scenario is that you will get a good deal but wait 6 months plus to close. Wells Fargo will lend under 600 credit scores if you have 10% down and meet a few other criteria. Best thing you can do is this: pay off your debts and try to keep 5% for down payment. Also establish some credit lines and use them properly to get your score over 600. At this point you will be set to purchase. Give me a call and I will assist you in getting things in order. I often work with people in your situation. If it takes 3 months or 3 years to get you in a position to purchase I will be there for you.

Lee Newcomb, Realtor
Long and Foster Real Estate
0 votes Thank Flag Link Sun Jul 8, 2012
As a short sale listing agent who has prevented 7 forclosures this year the only thing I can sy is that no preapproval with offer is the fast way to rejection.
0 votes Thank Flag Link Sun Jul 8, 2012
Yes you do. And with a 560 score, you probably won't qualify for a mortgage right now, but after you get your score up to 620 or bettter you will. A bank that is approving the short sale would not even consider your offer without knowing that you are approved for a loan as well as most sellers as you really don't have a valid contract without financing approval or proof of funds if you are paying cash. If you need help getting your score up, give me a call and I can refer you to someone that may be able to help you.

Tina Beasley
Associate Broker
Envision Real Estate, LC
0 votes Thank Flag Link Sun Jul 8, 2012
Absolutely. Agents shouldnt even be showing you homes without a prequal from a lender.
I know of several that can help you if needed. Good luck
0 votes Thank Flag Link Sun Jul 8, 2012
Most definitely. You need to have the pre-qualification from a lender to make an offer on any home. Ny having this it establishes you as a valid Buyer.

If I can assist you in any way, please let me know as I have a lot of experience with short sales & distressed properties.
0 votes Thank Flag Link Sun Jul 8, 2012
Yes. The bank will request it right away.
0 votes Thank Flag Link Sun Jul 8, 2012
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