Question Details

N, Home Buyer in Phoenix, AZ

We got approved for an FHA, but now the bank holding the REO wants us to be apporved by them, can they do

Asked by N, Phoenix, AZ Thu Feb 12, 2009

that? Are we obligated to let them run our credit again to be qualified by them?Shouldn't the approval letter by the other bank be enough?

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One of the problems I see as an Appraiser (FHA approved) is that banks sell their REO properties "as is". When a buyer is purchasing the property with FHA financing, the REO property may not meet/pass FHA requirements. Therefore, the bank may have to fix/repair any deficencies noted during inspection to meet FHA guideline requirements and approval. By having the buyer approved by the selling bank, they can close the deal "as is" without fixing/repairing anything that FHA would require. There have been times I've seen when banks flat out reject offers that are going FHA.
1 vote Thank Flag Link Fri Feb 13, 2009
Andrew is right.

A lot of buyer's agents and loan officers are not qualifying their buyers properly and the banks are having a higher than normal drop out rate due to unqualified buyers.

If the bank has you qualify through them, they have a better idea of the buyer's financial status.

I hope this helps.
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0 votes Thank Flag Link Sat Feb 28, 2009
The reason that a bank will ask you to prequalify again with them is that they have a full picture of the buyer that is buying the home, they can verify all information and make a informed decision on your offer.

the banks can make you qualify but can not force you to go through them.
0 votes Thank Flag Link Sat Feb 28, 2009
Another reason that banks are doing this is they are trying to earn your business.

If Bank "A" forecloses on a home and has it for sale and they are able to get the buyer financed, then they will "make money" and recoup some of their loss on the bank owned property via the interest the new buyer will pay. In other words they are trying to keep everything "in house" to maximize profit and minimize loss.

I hope this helps.
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0 votes Thank Flag Link Fri Feb 13, 2009
The approval from your lender in a normal market would be enough, however, in this market, we see more and more banks requiring this. It is a simple cross qualification, it just insures the bank that if they accept your offer and your lender is unable to successfully close, they can step in and get it done. See if the lender/broker that you are approved with can send your information ie: credit report/scores, income etc. over to the bank holding the REO. They should be able to get the approval done without pulling your credit again.
0 votes Thank Flag Link Thu Feb 12, 2009
They do this all the time. You don't have to agree to it if you don't want to but then will the bank reject your offer? I don't know. I am doing a mortgage on an REO right now and provided them with a pre_qual letter not pre-approval, they accepted it because I had gone through all of the buyers financials, While they were looking over the offer I ran it through the AUS and it came back approved then I submitted it to the bank and we have been fine since then.

Every bank is different. Good luck.
0 votes Thank Flag Link Thu Feb 12, 2009
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