Home Buying in Minneapolis>Question Details

John Nortton, Home Buyer in Minneapolis, MN

I got 100% finance pre-approval from my back through a mortgage representative and received the approval

Asked by John Nortton, Minneapolis, MN Mon Apr 14, 2008

in
the mail couple weeks ago. The pre-approval is good for 14 weeks with a floating interest rate. The mortgage representative contacted me last week to inform that the bank (as well as all lenders) does not offer 100% financing anymore, and that I will need to go with a 97% FHA loan with 3% financing.
Can the bank change their offers even though I have the pre-approval letter? Aren't they obligated to abide by the terms of the pre-approval letter?
Secondly, I've read several news article stating that 100% financing is rare if not impossible currently to get....is that true? I have very good credit score of 680 with less than 41% debt to income ratio, would I have better luck going through a mortgage broker or someone else other than my bank?

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Answers

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Beware of so-called "Pre-Approved" offers. The bank can and most likely will change their offer. At this point, they are offering you a pre-approval based on your score with little other information. Only after you have made a full application and received an actual approval should you consider your loan solid.
0 votes Thank Flag Link Tue Apr 22, 2008
Further, you have a right to your credit report. I suggest you only allow lenders to use the one you already have.

As for Wells with the 100% financing. In Oregon, they have done away with everything but the Guaranteed Rural Housing. As such, it is not likely they have anything where you are for 100% unless you are in a farm type area.

Again, I will answer whatever questions I can help you with!
0 votes Thank Flag Link Tue Apr 15, 2008
I have read the answers to your question and they are correct. Our lending environment is very volatile at this time. I would suggest you take the good faith letter, that you should have gotten , to one other lender. Look for a lender that actually does the lending. See what they will offer you. I do agree with Arron, don't shop too much. Every inquiry will subject your credit score to a possible decline in rate.
0 votes Thank Flag Link Tue Apr 15, 2008
Hi John ~ I am afraid that you have been caught in the middle of an uncomfortable time in this industry. While you did receive a pre-approval letter, most of these have disclaimers that the approval is not final. You will be in good shape with an FHA loan or one of that caliber. There are still several available at 97%.

You are correct...the 100% financing is basically obsolete for now. Sadly, there were too many people who abused the opportunities. Therefore, the choice for banks to offer these products have been pulled.

As to bank versus broker. i am a broker...and as such my loyalty lies there. That being said, I always recommend that you talk with more than just your local bank. Whether another bank or a third party broker, you are more informed and will feel better and more secure.

Best of luck to you...I wish I could help! :-)

Sarah Eubanks
Senior Mortgage Specialist
Hill Valley Financial Services
0 votes Thank Flag Link Tue Apr 15, 2008
A pre-approval is not a guarantee to fund a loan so yes, they can change their minds. Almost all lenders have gone with 95%-97% programs.

FHA does allow you to use Downpayment Assistance Programs (DAP) to have the Seller "gift" you the 3% down payment... but bank-owned & short sale deals are tougher with that.

Wells Fargo (and only them) has a program called CDMP that allows you to do 100% financing if and only if you meet very specific income limitations. Your 680 credit score is good but you need to be very careful not to do much for credit inquiries (don't go to 10 lenders) and do not open new credit accounts or rack up big credit card bills. 680 is teetering on the threshold where if it falls much you could end up paying a higher interest rate...

Russ Christian, a loan officer in my office, is quite familiar with CDMP and FHA with DAP if you have questions:

Russ Christian
Edina Realty Mortgage (Wells Fargo joint venture)
763-551-6706
http://russchristian.edinarealty.com
Web Reference: http://www.AaronSOLD.com
0 votes Thank Flag Link Mon Apr 14, 2008
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