I am a buyer. What are the pros/cons of making a mortgage application before having a mutually signed contract in place in a short sale situation?

Asked by Victor B, 60062 Sun Dec 5, 2010

I am a buyer. We are being advised by the sellers agent that a mortgage application is necessary to meet the short sale lenders close date even though the short sale lender has not signed the contract yet. Short sale lender has only verbally accepted the terms of my offer. What cost & other risks would I take if I make a mortgage application before having a mutually signed contract in place?

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Sun Dec 5, 2010

As a loan originator who has worked several short sales for my clients, I will tell you that what the Seller's agent is telling you is good practice. Legally, if the owner of the house has signed the contract as the seller, then you can move forward with a loan application. It is actually best for you to do so because the Seller's lender will likely give you a short time to close once they agree in writing. That time may be too short to get a loan ready to close.

I will tell you that we recommend our clients to move forward with the loan application when buying a short sale home and waiting on lender's approval. You already have the terms of the contract in place. We don't charge an application fee, so it doesn't cost the buyer anything to move forward. We can take the loan all the way up to an approval with just the appraisal as a condition, which is typically the only up front fee in a loan transaction. That way, when you hear from the Seller's lender, you are ready to close within 2 weeks. Speaking for the way we do business, there is really no con except it takes a little of your time and your hand may get tired from all the signatures.

I assume you already have a lender in place that has pre-approved you. I'd give him or her a call first thing tomorrow and email the contract to them. If not, give me a call, and I'll get you under application asap.

Bradley Eggers
Senior Loan Originator
Ardain Mortgage
(847) 744-0168 (cell)
(847) 963-1000 (office)
Web Reference:  http://Www.bradleyeggers.com
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Janet Baier, Agent, Elk Grove Village, IL
Wed Feb 9, 2011
Once the short sale lender approves the short sale they will want to close quickly. If you're not ready to close in 2 or 3 weeks they may very well cancel the deal.

You should have already done your home inspection and hired an attorney to look at your documents. If the listing agent is on top of things and your agent is watching what's going on, you should have very little risks of losing money. But if you wait to do this and then miss the deadline set by the bank, you run an even higher risk of losing the property.

If the bank has already chosen to work with your offer they must feel it's acceptable so take it at that and run with it!
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Lyn Sims, Agent, Schaumburg, IL
Mon Dec 6, 2010
I can offer only pros - the ability to make an offer on a great deal because you've already got your mortgage pre-approved. I recently had a buyer try & do the opposite & what happened? He found a great house that wouldn't accept ANY offers because he didn't have his mortgage preapproval in hand. Then his loan officer quit, was assigned another one, paperwork delays - it was very frustrating for this buyer. Had to pass over 2 houses because preapproval wasn't finished.

Keep shopping for a loan officer that you can feel comfortable with and then proceed.
Web Reference:  http://www.LynSims.net
0 votes
Edith Karoli…, Agent, Winnetka, IL
Mon Dec 6, 2010
You got a lot of good advice below! Yes get it!
Edith YourRealtor4Life and Chicago Connection
Working always in the very BEST interest of her clients
If you need a lender recommendation let us know...
Web Reference:  http://tinyurl.com/MeetEdith
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Brandon Schu…, Agent, Western Springs, IL
Mon Dec 6, 2010
Absolutely... It's a great idea to do a loan appliacation prior to buying "any" property. It's actually an unheard of concept with many Realtors. That's what's called a true "Pre-Approval". Short sale or straight up purchase, it's always a benefit to you as the buyer also. Why not take the time, do an application and have the mortage company process your loan until you get a full approval. I always tell my clients it's like having money in the bank. Besides, didn't you have to submit a letter from your bank, along with the contract saying you are "Pre-Approved"? My other question is... Why is the "seller's agent" advising you of anything?
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Suzanne MacD…, Agent, Succasunna, NJ
Mon Dec 6, 2010
The bank will require proof that you either have a mortgage commitment or proof of funds in place. As an agent, I would not make an offer without a mortgage pre-approval had been obtained. Our job is to bring a 'willing, ready and able' buyer. How on earth would we know if you were 'able' to buy the property unless you had been pre-approved for a mortgage?

Get the mortgage application going. I am surprised the bank even verbally accepted your offer without it.
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Janet Baier, Agent, Elk Grove Village, IL
Mon Dec 6, 2010
One of the other responders gave one of the best answers: once you get the go-ahead from the short sale lender you will have limited amount of time to finalize your mortgage to come up with an unconditional approval for closing - usually 30 days. Today's mortgages are typically taking 45-60 days again. Please understand that the short sale lender is jumping through hoops to get the short sale approved and all this while the foreclosure clock ( & costs ) is ticking for the owner. The short sale lender can't afford to have offer after offer go bad and they need some assurance that you are a ready, willing and able buyer.
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Melissa Murp…, Agent, Bellwood, IL
Sun Dec 5, 2010
You should ALWAY consult a mortgage loan officer before shopping, He or she will give you a lot of useful information about payments and how property taxes and HOA dues can effect the amount you may be qualified for. I work with a great loan officer at Milestone mortgage in Schaumburg! His name is Dave Dodson @ 847-619-0028. There are no costs to you and it is true, when presenting an offer on any home, most sellers agents will require a pre quailification letter. This is true of short sales, a bank owned foreclosure or a regular sale. To be honest I am suprised your agent took you to view homes without it! I require that all my buyers start with this. If you are in need of an agent I live in Schaumburg and would be happy to assist you! I specialize in foreclosure and short sale transactions.
http://www.REOCaseyWagner.com is my website with all my contact information.

Melissa Murphy Hainault
0 votes
, ,
Sun Dec 5, 2010
If you are planning to buy anyway, whether this house goes through or not, you can probably just get a loan approval without an appraisal, clear all conditions except for the appraisal condition, then have the house appraised once you have the lender's written approval. Cost-wise, you are not paying for an appraisal. Most lenders will not charge you more than 1 application fee, even if you end up with another house.
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John Ziemba, Agent, Palatine, IL
Sun Dec 5, 2010
Typically, you need a pre-approval from a lender when submitting an offer and the sellers lender requires usually requires this to approve a short sale. In addition your lender must be able to close within 30 days after short sale approval. There should be no cost to put an application in. I would suggest you use a buyers agent experienced with short sales when purchasing. There is no cost for for a buyers agent and the commission is paid for by the bank. You will not save money doing it on your own. If you have any other questions please do not hesitate to call me at 847-217-0480. You can call me anytime including now or email me at JohnZ@kw.com. I have a lot more I can explain but I am typing on my iPhone. Good luck,

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