Pre-approval & getting ducks in a row

5 years ago

last modified: 5 years ago

I keep hearing how I need to be pre-approved and have documentation stating that I'm approved for X amt. of $$$. And yet I just can't seem to find a lender who will do this - one bank said they cant generate anything generic, they can only do something specific re: a specific property. Well we all know the market is so hot that I dont have time to wait for them to generate a pre-approval before making an offer. On the other hand - do I want the seller to see a generic statement that states the maximum I can afford? There goes my bargaining power.

WHAT exactly is it that I need to have for making an offer, and who would provide it? Have only talked to banks thusfar, and to further complicate matters there are three different possible for scenarios how I can pay for a property depending on price and whether it's a multi-unit bldg (like the one I currently owner-occupy) vs a small house.

One other possible scenario would involve selling my current property to go toward a new one. A couple years ago I was told my current property (in a hot location) would sell within days, so making an offer contingent on sale of current place was a viable option. I don't know about now - pretty much don't want to have ANY contingencies, correct? Maybe get some kind of bridge loan to buy property, and then sell old to pay off loan? All I know is I don't want to sell before I have another one lined up.

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Comments (5)

maifleur03
5 years ago
No bank is going to lend you more than a house will appraise for. Since many are being sold for above appraised value you will need a lot more cash than what any house you are looking at will appraise for. It does not matter what a generic letter would state as to the maximum you are preapproved for.
Debbie Downer
Original Author
5 years ago
i really dont want to go into all the nuances of my financial situation - I have some cash. Are you saying that if sale price is above appraised value (ie what the bank determines is appraised value) that I cannot get a loan for any portion of it? Or just the portion that goes above the appraised value? Are you saying that the preapproval letter is just a statement of the maximum loan amount I qualify for?
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maddielee
5 years ago
the first place to go would be the lender you used for the properties you already own. Or ask at you bank who they reccommend.

A preapproval letter is a letter from a lender stating how much they would tentatively loan you. Emphasis on tentatively. It’s not binding. To get such a letter you will need to complete an application. Google is your friend.

”Know where you stand before reaching out to a lender. A credit score of at least 620 is recommended, and a higher credit score will qualify you for better rates. Generally a credit score of 740 or above will enable most borrowers to qualify for the best mortgage rates.
1. Check your credit history. Request copies of your credit reports, and dispute any errors. If you find delinquent accounts, work with creditors to resolve the issues before applying.
2. Calculate your debt-to-income ratio. Your debt-to-income ratio, or DTI, is the percentage of gross monthly income that goes toward debt payments, including credit cards, student loans and car loans. NerdWallet’s debt-to-income ratio calculator can help you estimate your DTI based on current debts and a prospective mortgage. Lenders prefer borrowers with a DTI of 36% or below, including the mortgage, though it can be higher in some cases.
3. Gather income, financial account and personal information. That includes Social Security numbers, current addresses and employment details for you and your co-borrower if you have one. You’ll also need bank and investment account information and proof of income. Documents you’ll need to get a mortgage preapproval letter include your W-2 tax form and 1099s if you have additional income sources and pay stubs. Two years of continuous employment is preferred, but there are exceptions. Self-employed applicants will likely have to provide two years of income tax returns. If your down payment will be coming from a gift or the sale of an asset, you’ll need a paper trail to prove it.
4. Contact more than one lender. Comparing offers from multiple lenders can help you compare rates and fees and save you thousands of dollars over a 30-year mortgage. Going through the mortgage preapproval process shouldn’t hurt your credit score. FICO, one of the largest U.S. credit scoring companies, recommends confining those applications to a limited time frame, such as 30 days.”
elcieg
5 years ago
last modified: 5 years ago
Yes, the preapproval letter is a statement of the maximum loan amount for which you qualify.

Contact more than one lender.
Elmer J Fudd
5 years ago
last modified: 5 years ago
"No bank is going to lend you more than a house will appraise for."

Banks don't generally make 100% loans anyway. I think you perhaps meant to say 90% or 80% or whatever percentage borrowing the loan being applied for will provide. For preapproval, you apply for a loan without a property identified. The preapproval has to do with an assessment of the applicant as a borrower without regard to the ultimate acceptability of the as yet unspecified property, which is a "to be determined" matter.