Loan Pre-Approval

Seaside Realty

One of the keys to a successful real estate transaction is a smooth loan process. Sounds simple enough, and it almost always is when the buyer provides all necessary documents requested by the loan officer. Why are the proper documents so essential? Here are two reasons:

(1) When your loan officer inputs your information into an automated desktop underwriter program, the initial approval for your loan, which still needs to be verified, scrutinized, and approved by human underwriters, is only as good as the data inputed.  For example, if your loan officer inputs data that is incorrect based not on the documents provided but your verbal information, and the information is wrong, then you could possibly be denied the loan down the road.  And to have a loan denied in escrow is of course, upsetting and stressful.

(2) A reason for delayed full approval from underwriters is when the buyers do not satisfy all the conditions of the loan, including complete documentation.  With a standard escrow period of 30 days (possibly longer for non-conventional loans or other circumstances) and the standard 17 day loan contingency, providing all documentation upfront will speed the approval process.  And every buyer certainly wants full approval from the lending institution before the 17 day loan contingency in order to not worry about your earnest money deposit being taken as liquidated damages for non-performance if the loan gets denied after removing the loan contingency.

WHAT DOCUMENTS ARE REQUIRED OF THE BUYER?

As the lending environment seems to be changing daily, this is a basic list (not all-inclusive for every transaction):

  • Last two years of tax returns

  • Last two W-2s from employer

  • Last two months of bank statements (including retirement accounts, investment accounts, etc)

  • If renting, possibly cancelled checks for the past year

  • If you own investment properties or are self employed, expect to provide additional documentation

Here are some DO’s and DON’Ts prior to getting a loan:

  • Do review your credit for errors

  • Do have your deposit and closing funds showing in your last two financial statements (unless you are receiving as gift funds).  Otherwise, you will have to verify the source.

  • Don’t apply for new credit

  • Don’t cancel any credit accounts

  • Don’t make any major purchases

Chris  Chin |Broker & Owner

August 26, 2014

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