While many experienced real estate agents have a general understanding of the mortgage approval process, there are a few important details that frequently get overlooked which may cause a purchase to be delayed or denied.
New regulation, updated disclosures, appraisal guidelines, mortgage rate pricing premiums, credit score, secondary approval layering, rescission deadlines, property type, HOA insurance requirements, title and property flip rules are just a few of the daily changes that can have a serious impact on a borrower’s home loan financing.
With today’s volatile lending environment, it’s obviously important for home buyers to get a full loan approval which clearly defines all contingencies that pertain to each unique home buyer’s scenario prior to spending any time looking at new homes with an agent.
Envoy Mortgage understands the challenges in mortgage lending and have created Envoy on Track. While most lenders and banks will only pull your credit before you make an offer, Envoy Mortgage will go the extra mile to ensure you avoid any complications or delays. Envoy on Track allows you to obtain underwriting pre-approval, prior to ever making an offer. Underwriting pre-approval allows you to search for a home in peace, knowing your mortgage financing has already been reviewed by an underwriter.
Either way, we’ve listed a few of the top things your agent should keep in mind while showing you new properties:
Caution – Agents Beware:
Property Type –
Need to sell one home before moving into another? Is a property considered a second home if it’s in the same city? What if I’m buying a home for my children to live in, it is still considered an investment property?
These are just a few of several possible residence related questions that should be addressed by your agent and loan officer at the initial loan application.
Mortgage Rates are typically locked for a 30 day period, and one of the only ways to get a new rate is to switch mortgage lenders. Rates also have certain adjustments for property / residence type, credit score and down payment which could have a big impact on monthly payments and therefore approvals.
A 1% increase in rate could literally mean the difference between an approval or denial.
Verifying Assets/Down Payment –
Underwriters and investors review bank and assets statements very carefully. They want ensure your down payment are from acceptable sources. Cash deposits, unsecured loans, and money from unverified sources are not acceptable sources for down payment and can cause problems for delays with your mortgage approval.
Title / Property Flip –
A Flip is considered a property that has been purchased by an investor and quickly sold to a new buyer within a 30-90 day period. Generally, an investor will do a little rehab work, fresh paint, landscaping…. and try to re-sell the property for a significant profit margin.
While it seems like a perfectly fair transaction, many lenders have strict guidelines in place that prevent borrowers from obtaining financing on properties that have a previous owner with less than 90 days of documented ownership.
These rules change frequently, and are specific to particular property types, so make sure your agent is aware of all the boundaries associated with your approval letter.
New Credit –
Mortgage lenders can not pull your credit constantly, but they are required to verify your total debt before issuing a final approval. Therefore, most mortgage lenders will re-pull your credit prior to issuing a final approval or closing. If you obtain a new credit card or auto loan between first applying you loan application can be denied or closing delayed. Hold off on applying for any new credit until after you close and if you must apply for new credit make sure you notify your mortgage lender ASAP.
Appraisal ordering guidelines are changing quite frequently as regulators implement many new consumer protection laws created to prevent future foreclosure epidemics.
Unfortunately, some of the new appraisal regulations have proven to slow the home buying process down, as well as confuse lenders about the true estimate of neighborhood values.
VA, FHA and Conventional loan programs all have separate appraisal ordering policies, so make sure your agent is aware of which loan you’re approved for so that they document any anticipated delays in the purchase contract.
For example, if an appraisal takes three weeks and the average time for an approval is two weeks, then it probably isn’t smart to write a purchase contract with a four week close of escrow.
Related Articles – Home Buying Process:
- Home Buying Process
- First-Time Home Buyer Credit Checklist
- Assembling Your Home Buying Team – Knowing The Players
- Important Factors To Consider When Getting Financing On A Foreclosure, Short Sale or New Construction
- Where Does My Earnest Money Go?
- HOA Hurdles to be Aware of When Looking at New Properties
- What You Need To Know About The Home Inspection Process