Home Buying in Dallas>Question Details

Mathew George, Home Buyer in Dallas, TX

Which is better ? A preapproval or prequalify? How long are they valid ?

Asked by Mathew George, Dallas, TX Thu May 15, 2008

Are 100 % loans still available ? I have an excellent credit , and a little consumer debt .

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When representing sellers, i usually ask for pre-approval confirmation with all offers, and make sure that final loan approval deadlines as stated in the contract are met. This gives my sellers the peace of mind that the buyer's are intent & motivated in following through on the terms of the contract and that we haven't removed their property from the market to no end.

When representing buyers, i respectfully request that they obtain pre-approval from their lender during the search process. If we make a property match, we are ready to make a viable offer & can show good faith on the part of the buyer to complete the contract terms. Either way, i advocate for pre-approval, as pre-qualification is just not as valuable!

I can recommend the names of mortgage professionals who can assist you with the 100% loan question, if you want to call or e-mail me ~ thanks, Vivian Katz, CIPS (407-367-9883 or GlobalPropSpec@aol.com)
1 vote Thank Flag Link Thu May 15, 2008
A pre-approval carries more weight than a pre-qualification. The most effective pre-approval letters are property specific and are written by the mortgage broker at the time you make an offer.
1 vote Thank Flag Link Thu May 15, 2008
100% loans are available per se, but you need a gift program to provide the required down payment for you..
And as of June 1st, the automated underwriting program will use a program called 7point0 to "pre approve" buyers.

You can go FHA, get 3% down (required) down payment assistance from the Nehemiah program, and ask the seller to pay closing costs. I have had the best luck with this program through quicken loans.
The interest rate is 5.875% with Quicken. I have a direct contact who provides his personal cell number so please contact me at lucy@webuyitwesellit.com if you are interested in moving forward with your transaction.
Best of luck to you!
Lucy
0 votes Thank Flag Link Thu May 29, 2008
Mathew: The terms are often used (mistakenly) interchangeably, but they are not even close, by comparison --see LINK at bottom

Pre-qualified: As already noted in other responses, this suggests that you called a mortgage representative on the phone, introduced yourself, advised you are interested in buying a home, answered some questions about your finances (e.g., SALARY, income) and debt — after which, in theory, you will be “pre-qualified” for a loan up to a certain amount.

Pre-approval: Here, the bank will verify your salary (2 years of W2’s), income, assets, debts (2 tax returns) and credit history.

Both of the above POSITIONS are typically stated by a loan officer in a letter that can be furnished for any real estate purchase offer.

Now think about this. Everybody in the real estate and banking business knows these definitions and processes. Your opinion – of what VALUE to anyone is a “Pre-Qualification Letter”? Here is my totally biased opinion. It is not worth the paper it is written on. Sort of better than nothing (but worthless). Often it means that the buyer was too lazy (busy) to take time off to get the papers to the lenders that are required to make a pre-approval judgment. Now if you were a well intended Realtor with a need to do a good job representing your seller’s best interests, would you advise the seller to ACCEPT an offer on their home where the financing addendum is accompanied by a pre-qualification letter? OK. How about this. What if the seller gets 2 offers on a property at the same time (not uncommon), one with a pre-qualification letter and one with a pre-approval letter? Assuming all terms were the same, what offer should the seller select? I will put it another way. No client I represent will accept a pre-qualification letter on an offer and then sign a contract. And I am not alone on this advice. This should stir up a few more responses.
Why? If the home does not CLOSE because financing fails at the last minute (very common), can you imagine how happy everyone is? Oh – and what about those moving vans? Good by Earnest money. The plot thickens.
Web Reference: http://tinyurl.com/6jlygp
0 votes Thank Flag Link Sun May 25, 2008
Hi Mathew,

Well... what are you trying to do? Go shopping for a home? Put an offer in on a home? A pre-approval shows that you are a serious buyer and have done your homework and legwork to get pre-approved to be able to buy a home. You've talked with a mortgage company and, based on what you've TOLD them, they've approved you for x amount to go out and go shopping for a new home.

Pre-qualification is different in that now you've provided the mortgage company documentation actually backing up what you've told them. So, you've given them paystubs, W2's, 1099's, etc. For example, sometimes people work overtime and they mentally calculate that into their annual pay and may overestimate that amount. When they actually provide the documentation to the mortgage company, their pay is overstated by $7,000. This can change their DTI (debt to income) ratios which could change the amount they are "pre-approved" to buy. They're usually open for 90 days.

Yes, there are still 100% loans still available - especially for people with excellent credit. There are FNMA products, my community loans and down payment assistance loans that can get you into your new home for $500. I am not a loan officer or lending professional. However, I can refer you to an awesome loan officer - Katie Sparkman - ksparkman@houseloan.com - http://www.katiesparkman.com - 817.807.5367.

Love your avatar!

Let me know if we can help further!
Terri Hayley
0 votes Thank Flag Link Thu May 15, 2008
I am a Dallas home mortgage loan officer, and Dallas real estate agent, allot of loan officers and realtors interchange the pre-qualification and pre-approval with each other. However it still shows with that letter you have gone thru several steps to show you are a "real buyer" in order to submit an offer on a property, listing agents, buyers agent, banks, seller will review this document with the submitted offer

You can't purchase a home or offer will be accepted unless you have a lender letter, I some cases I might contact the person who authored the letter to determine if they are real, and few other issues prior to working as a buyers agent or accepting an offer on a house I have listed

100% loans are not still available, you need to "put skin in the game" based on credit scores that range from 5% to 20% HOWEVER there are exceptions to the rule, can't state unless a person financial records are reviewed.

2nd lien holders have taken a huge hit in many instances a person will pay the 1st lien than the second lien for the fact the second lien is the smaller amount.

Contact my office if I can be of any further assistance there are some GREAT foreclosures on the market approx. 10% or more below market value move in condition, some are new construction.

972-699-9111
Lynn
Web Reference: http://www.lynn911.com
0 votes Thank Flag Link Thu May 15, 2008
Mathew,
A pre qualification is really intended to let you and your Realtor know the max. price range you should be considering.
It by no way means you will get a loan for that amount, it just means you have started the loan approval process.
Your pre qualify letter is only accepted by the Realtor. The Sellers and will want a preapproval letter.

Prequalification is the first step and Pre Approval is the second step.

The consumer debt has to do with your FICO. Are you saying this debt prevents you from being able to make a down payment?
Wanting a 100% loan for leverage and Needing one because of debt are two different things. The latter will interfer with most loans.

I will not say that 100% loans are not out there buy I certainly know of none. They were realy 80/20 loans with no PMI. You may still be able to get an 80/10/10 to keep fro mhaving the PMI insurance if that is what you are trying to do. If it is a nothing down then you will have to find an 80/10 and 10 owner financed.
These will be priced higher but you will not have the PMI.

Hope I helped a little, good luck

Margaret
0 votes Thank Flag Link Thu May 15, 2008
Mathew,

There are significant differences between these two forms of credit approval. A pre-qualification simply means that the Buyer has "told" the lender what their income and debts are and based on this informtion, the lender will pre-qualify the Buyer for a certain loan amount. This is just a "stake in the ground" for the Buyer to give them an idea of what price points to look for and are virtually meaningless to anyone else. In fact, when I represent a Seller and I receive an offer with a pre-qualification letter, I will ask that it be replaced with a pre-approval letter before the Seller will negotiate the offer.

A pre-approval is different because the lender has actually pulled a credit report and verified much of what the Buyer told them prior. So now the lender has a much better idea of the Buyer's credit position and will generally issue a pre-approval letter with certain condtiions. These conditions can include proof of finances and other items that will be required by an underwriter. A Buyer with a pre-approval letter is in a much stronger position than one with just a pre-qualification letter.

There are 100% programs available. These can be a combination of pure 100% or two separate mortgages that total 100%...80%/20%, 85%/15%, 90%/10%. These are the most common programs. With good credit and little consumer debt, a Buyer will have access to many different mortgage programs. And these programs change almost daily. It's a good time to be a Buyer.

Hope this helps. You are asking some great questions. And thanks for being a Trulia Voice.

Please feel free to call or email if I can help you in any way.,

Alan Wynn
Like NO ONE Else!
214.729.5582
info@DallasHousesOnTheWeb.com
0 votes Thank Flag Link Thu May 15, 2008
Matthew,

As a P.S., 100% loans are very questionable at this point. You have to ask yourself not whether or not you "can" get one, but "should" you get one. You'll pay through the nose with higher fees, higher interest rates, probably some sort of mortgage insurance, and you end up with a house that not only doesn't have any equity, it has negative equity.

Why negative equity? Well if you listen to everyone else, it's a great idea, buy a home that's devalued with 100% financing and watch it go up in value. High leverage, high reward. But that comes at high risk. At a minimum, since your most likely going to sell the home in the future using an agent, you're already underwater with 100% financing by the amount of commission required to complete the sale, plus you'll likely have to pickup title insurance for the buyer, and pay other closing fees.

That means, in most markets, that until some time in year 2 of your ownership, you can't even sell the house and breakeven, and that's only if the market is on the increase.

Sorry for the tough love, but save up for a down payment, it has a ton of benefits, not the least of which is lower overall costs over the life of your home ownership.

Take care,

Jeffrey
0 votes Thank Flag Link Thu May 15, 2008
Correct, pre-approval carries more weight than a pre-qualification, simply because the lender has done a more thorough job looking at you and the value of the house you want to buy. In the end though, even with a pre-approval, you could still get into a situation where the house doesn't appraise to the offer price, then the pre-approval is pretty worthless for that property.

Both types of approvals are typically accepted up to 90 days out from the date of issue, but the more current the date, especially in these iffy times, the better. Most good lenders will be able to provide you with a pre-approval letter in 1 or 2 days, some do it within hours. It's best to submit a pre-approval that is just at the offer price and not more, that way the seller is not getting an indication that you can afford more than what you've offered.

I typically have my clients ask for several pre-approval letters at various amounts so they can be ready to make an offer at a moments notice without having to wait for the lender to produce one. When you do get a pre-approval letter, make sure the lender only lists the amount you are approved for. There is no reason for anyone but you to know the other terms of your loan.

Good luck!

Jeffrey
0 votes Thank Flag Link Thu May 15, 2008
Like they said a preapproval is better, and yes you can still get 100% loans. I have a oan officer in my office that works with 100% percent loans all the time and she is great. Please feel free to give me a call and i will give you her number

Josh Isham
Keller Williams Rockwall
Cell: 903-217-5644
JoshIsham@kw.com
http://www.IshamRealEstate.com
0 votes Thank Flag Link Thu May 15, 2008
Matthew,

A pre-approval is stronger than a pre-qualification however they are both very similar and there are not that many differences. With your credit situation as you describe it you should be able to get a pre-approval letter from a lender very quickly. They are valid for the amount of time listed in the contract whereas the seller will request an actual approval letter or lastly a loan commitment. These letters have fewer contingincies than a preapprovals and prequalifications.

100% loans are still available I closed one today. If you are a first time buyer I would look into FHA programs and also state assisted programs. Alot of times, depending on what state you live in there will extra benefits in your favor if you take advantage of them. Hopes this helps! Sounds like you should be fine and good luck with your new purchase!!

Brent Bester
Mortgage Professional
614-622-8916
bbester@usavingsbank.com
0 votes Thank Flag Link Thu May 15, 2008
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