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  • Writer's pictureMichael Sebastian

HOW TO COMPETE WITH CASH OFFERS. NOT ONLY GET PRE-APPROVED BUT PRE-UNDERWRITTEN!



What does it mean to get pre-approved for a loan? Being pre-approved means that your credit has been reviewed and that frames a hypothetical offer. The framework is detailed in your pre-approval letter with items as the allowable purchase price, lending fees and interest rate are expressed that serve to give you a realistic expectation of what a home purchase means for your financial picture.

A pre-approval letter is the gateway to being able to shop for a home with a real estate agent. Without one it’s simply not efficient for a real estate agent to work with someone who doesn’t have their letter, because if your home aspiration don’t meet your finances well, too often it wastes both their time and yours.

The pre-approval letter is the document from a lender detailing the loan amount that they would provisionally lend to you so that you can purchase a home.

The following is a mortgage checklist of the documents lenders typically initially ask for:

· W2 & 1099 forms (For the last 2 years)

· Current Paystubs. (Or if you’re self employed, your tax returns for the last 2 years)

· Federal Income Tax Returns (For the last 2 years. Also include business returns if self employed)

· Social Security Number (Along with full legal name, date of birth & current address)

· Recent Investment Statement (401k’s, IRA’s, etc.)

· Bank Statements (Last 2 months of checking/savings account statements)

Pre-approval letters are usually valid for either 30, 60, 0r 90 days.

Once your paperwork has been submitted, now your application has to go through underwriting to be approved for the actual loan. What happens next is that the underwriter does a deep dive into your finances looking for red flags or items that need answers. They’ll look at your employment history, Credit score, credit utilization, payment history, savings, defaults an the overall risk of potential loan failure.

This process called underwriting is where many loans falter, delay or can be denied. Underwriters are under strict guidelines when they are determining your eligibility for the loan. In review they will frequently come up with many questions that need to answered to satisfy their guidelines for approval.

These items can be a need for clarification, some more information or updated documents or additional documentation. These are known as conditions that the underwriter will give to the processor to eventually submitted to you the borrower. It is of high importance that you get whatever documentation/clarification submitted to your lender so that your loan doesn’t get bogged down in underwriting.

Okay. Now that we’ve covered that what is PRE-UNDERWRITING? And how do you use it to your advantage.

Know that, underwriting typically does not take place until your offer on your home has been accepted and that they actually have a property to tie to the loan. Pre-underwriting is when you submit your documents to your lender and that your lender will analyze your finances with the underwriting process before you’ve even put an offer. Even before you’ve even started to look at homes.

Is there a benefit to pre-undewriting? We’ll that brings us to the title of this post. Being pre-underwritten can certainly help you with cash buyers. Cash buyers typically require a 30 day close because they don’t really have the actual cash on hand. Usually it’s tied up in investments, stocks, 401k’s etc. So they need the 30 days to liquidate some assets.

By being pre-underwritten that means your file is good and that the only thing left to do is essentially order the appraisal in a timely manner. This allows your realtor to write an offer with a quick closing time. Sometime as early as 10 to 12 to 14 days. There’s a couple of things needed to make this happen.

· You must first find a lender that will do pre-underwriting.

· You must have all documentation in hand and regularly send in updated documentation as needed.

· You must submit all conditions required in a prompt manner. (24 hours if possible)

· Make sure that you’re working with a mortgage loan officer and a realtor who are both good at communicating so that they can both react nimbly and creatively when your offer is accepted.

· Underwriting is still underwriting. Meaning that it can still take a few weeks if there’s missing documentation or discrepancies and questions that need to be answered about your finances. So you may have to be patient until you get pre-underwritten. But once your set you can offer that super quick closing.

While being pre-underwritten isn’t a guarantee that your offer will be accepted. It will help you stand out amongst all the others and help to influence a motivated seller that doesn’t want to wait for a cash buyer.

Stay tuned for more home buying tips soon.

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