Preapproval for a new home

Anonymous · ‎02-08-2017

We really liked a new home from a builder in our area. It is a townhouse priced at $450k and the construction hasn't started yet. It is scheduled to be delivered for August/ September timeframe. We need to pick the lot, select options and negotiate price in the next 2 weeks. Then we are required to enter into contract/purchase agreement. The builder needs a preapproval in 30 days from that point. Since this is only good for 90 days, we'll have to go for final mortgage approval again in June/July timeframe.

I have 678 MMS and my wife has 714 MMS. I am expecting my scores to improve by atleast 20-30 points as I just paid off couple of cards that had high UTI(70%+). We also paid about 3k of my wife's cc to get the UTI down to 60% so we are expecting her score to improve also. After these scores report, my total UTI will be at 18% and wife's will be at 28%. Since we used some of our reserved funds to pay down the cards last month, we are now left with $12k in savings. I have another $11k in 401k funds. My annual salary is $120k(+5% bonus) and my wife draws $108k. I am projecting that we'll have atleast $45k in savings by june end to use for down payment. My question is if we go for preapproval in the next two weeks, can one of us get approved since we don't have much reserve funds available now? Can the LO look at our W2's, tax returns and bank statements and project the funds available when it is time for closing? I can get about $15k in gifts from my cousin if required for preapproval. We are first time home buyers and really learning all the steps here. Any advise is really appreciated. Thanks in advance.

MauiMan85297 · ‎02-09-2017

I just went through this last June with new construction and just closed 2 months ago. The builder is typically looking for a pre-approval letter from your loan company and the loan company basically runs credit to see if your MMS's fall into their lending criteria and they get some other info (wages, etc) for a pre-approval not an approval (as they 're only good for 90 days). Typically a month or 2 out from closing they will get whatever else is needed and ask about banking info (last 2 months of FULL statements of bank accounts) and ask if you have the funds to bring to closing. I could be wrong (depending on loan company) but for pre-approval they aren't worrying what's sitting in your reserves just yet.

Anonymous · ‎02-09-2017

Thanks Sully! would you know if your preapproval went through underwriting? If so, can you share what details they were asking for?

Did you go through a broker? if you don't mind can you share who the lender was in your case?

Anonymous · ‎02-09-2017

I just went through this, so yes its different by case. I had to have pre-approval before builder would sign contract. Once I signed that I had 21 days to get approved (so it went through underwriting) with minimal conditions with a lender. Or as they call it a loan commitment. Now they start building once I chose all my interior and exterior items. This builder wont even go through that if they even think you wont make it to closing.

Anonymous · ‎02-09-2017

@Anonymous wrote:
I just went through this, so yes its different by case. I had to have pre-approval before builder would sign contract. Once I signed that I had 21 days to get approved (so it went through underwriting) with minimal conditions with a lender. Or as they call it a loan commitment. Now they start building once I chose all my interior and exterior items. This builder wont even go through that if they even think you wont make it to closing.

Hi juniebrunner, So If I understand correctly, you went through approval process twice, first to enter the contract with builder and then before closing. When you went through for first time, did you have to show the reserves for down payment and closing costs?

MauiMan85297 · ‎02-09-2017

@Anonymous wrote:
Thanks Sully! would you know if your preapproval went through underwriting? If so, can you share what details they were asking for?
Did you go through a broker? if you don't mind can you share who the lender was in your case?

My pre-approval didn't go through UW in June 2016, was given the pre-approval letter that went straight to the builder (used one of the 5 companies through builder because of incentives). This was enough for the builder to start the build, we only put down $500 earnest deposit because it's a VA loan while others like yourself would put down whatever type of loan you're going with (3.5% FHA, 10% or 20% Conv, etc) and like my co-worker did they took the deposits at set months until the % of deposit was the full amount.

Depending on your loan company they're not going to worry too much about your reserves until they do a FULL approval and if they did that now or 30 days from now they would have to do another before you closed because that one would have expired (I've heard of some approvals good for 120 days).

I live in AZ and went through On Q Financial dba Loan Depot. Never made a payment to them as they sold the loan immediately to Wells Fargo.

Anonymous · ‎02-09-2017

@Anonymous wrote:
@Anonymous wrote:
I just went through this, so yes its different by case. I had to have pre-approval before builder would sign contract. Once I signed that I had 21 days to get approved (so it went through underwriting) with minimal conditions with a lender. Or as they call it a loan commitment. Now they start building once I chose all my interior and exterior items. This builder wont even go through that if they even think you wont make it to closing.
Hi juniebrunner, So If I understand correctly, you went through approval process twice, first to enter the contract with builder and then before closing. When you went through for first time, did you have to show the reserves for down payment and closing costs?

Actually i dont count the pre approval as one. All he did was run my credit and ask a couple of questions, so no, no documents for the preapproval.

Then once we had a contract it went through processing and underwriting and yes thats when I had to deliver all the documentation. Keep in mind the preapproval was on a Saturday, signed contract on Sunday and then within 2 weeks I was through underwriting. I will have to provide updated information again closer to closing since it would have expired. My build is 3-4 months.

Anonymous · ‎02-09-2017

@gsully00 wrote:
@Anonymous wrote:
Thanks Sully! would you know if your preapproval went through underwriting? If so, can you share what details they were asking for?
Did you go through a broker? if you don't mind can you share who the lender was in your case?
My pre-approval didn't go through UW in June 2016, was given the pre-approval letter that went straight to the builder (used one of the 5 companies through builder because of incentives). This was enough for the builder to start the build, we only put down $500 earnest deposit because it's a VA loan while others like yourself would put down whatever type of loan you're going with (3.5% FHA, 10% or 20% Conv, etc) and like my co-worker did they took the deposits at set months until the % of deposit was the full amount.
Depending on your loan company they're not going to worry too much about your reserves until they do a FULL approval and if they did that now or 30 days from now they would have to do another before you closed because that one would have expired (I've heard of some approvals good for 120 days).
I live in AZ and went through On Q Financial dba Loan Depot. Never made a payment to them as they sold the loan immediately to Wells Fargo.

I too went with one of the preferred lenders of the builder and they move mountains and are quick about it! However my builder requires that loan commitment within 21 days of contract.

MauiMan85297 · ‎02-09-2017

@Anonymous wrote:
@gsully00 wrote:
@Anonymous wrote:
Thanks Sully! would you know if your preapproval went through underwriting? If so, can you share what details they were asking for?
Did you go through a broker? if you don't mind can you share who the lender was in your case?
My pre-approval didn't go through UW in June 2016, was given the pre-approval letter that went straight to the builder (used one of the 5 companies through builder because of incentives). This was enough for the builder to start the build, we only put down $500 earnest deposit because it's a VA loan while others like yourself would put down whatever type of loan you're going with (3.5% FHA, 10% or 20% Conv, etc) and like my co-worker did they took the deposits at set months until the % of deposit was the full amount.
Depending on your loan company they're not going to worry too much about your reserves until they do a FULL approval and if they did that now or 30 days from now they would have to do another before you closed because that one would have expired (I've heard of some approvals good for 120 days).
I live in AZ and went through On Q Financial dba Loan Depot. Never made a payment to them as they sold the loan immediately to Wells Fargo.
I too went with one of the preferred lenders of the builder and they move mountains and are quick about it! However my builder requires that loan commitment within 21 days of contract.
With above quote, if your build completion date is outside your approval timeframe there would have to be another credit pull and whether they would need current bank statements and anything else that might have changed since the last approval. I guess all builders are different as with mine they did pre-approval (credit runs and some questions) but didn't do a FULL approval with W2's and bank statements until 2 months prior to my Dec 6th close date. Typically if an UW has seen your file then it's already gone through AUS with either a approve/eligible or refer/eligible as the system is only good as what's inputted by the LO/loan handler.

Anonymous · ‎02-09-2017

@gsully00 wrote:
@Anonymous wrote:
@gsully00 wrote:
@Anonymous wrote:
Thanks Sully! would you know if your preapproval went through underwriting? If so, can you share what details they were asking for?
Did you go through a broker? if you don't mind can you share who the lender was in your case?
My pre-approval didn't go through UW in June 2016, was given the pre-approval letter that went straight to the builder (used one of the 5 companies through builder because of incentives). This was enough for the builder to start the build, we only put down $500 earnest deposit because it's a VA loan while others like yourself would put down whatever type of loan you're going with (3.5% FHA, 10% or 20% Conv, etc) and like my co-worker did they took the deposits at set months until the % of deposit was the full amount.
Depending on your loan company they're not going to worry too much about your reserves until they do a FULL approval and if they did that now or 30 days from now they would have to do another before you closed because that one would have expired (I've heard of some approvals good for 120 days).
I live in AZ and went through On Q Financial dba Loan Depot. Never made a payment to them as they sold the loan immediately to Wells Fargo.
I too went with one of the preferred lenders of the builder and they move mountains and are quick about it! However my builder requires that loan commitment within 21 days of contract.
With above quote, if your build completion date is outside your approval timeframe there would have to be another credit pull and whether they would need current bank statements and anything else that might have changed since the last approval. I guess all builders are different as with mine they did pre-approval (credit runs and some questions) but didn't do a FULL approval with W2's and bank statements until 2 months prior to my Dec 6th close date. Typically if an UW has seen your file then it's already gone through AUS with either a approve/eligible or refer/eligible as the system is only good as what's inputted by the LO/loan handler.

Thanks guys... from what I am understanding it... if the preapproval process goes through UW, we are required to submit all the documents - paystubs, W2's, bank statements etc... and the process we need to go through really depends on what the builder is looking for.