topic Re: Do they look at your bank accounts during preapproval? in Mortgage Loans

Do they look at your bank accounts during preapproval?

mizvalentine — Thu, 23 Aug 2012 15:33:30 GMT

Every morning I wake up with a new fear on this preapproval process...I apologize if this question has been answered, I did search but couldn't find it.

I have good credit (691 TU, 755 EQ), good salary ($63k) and decent DTI (13%).

However, I just started a new job where I'm paid monthly, and moved to a new state...so I'm draining my old bank account so I can close it, and only just opened a new account so there's like $600 in there. I already told the LO that I'm getting the downpayment as a gift from my parents, but am I in danger of not being preapproved because my accounts are empty?!

I swear my head is gonna explode!

Re: Do they look at your bank accounts during preapproval?

Anonymous — Thu, 23 Aug 2012 17:12:40 GMT

Are you going FHA? If so, cash reserves are not required and gifts for downpayments are allowed up to a certain amount like $20,000 I think. Hope this helps.

Re: Do they look at your bank accounts during preapproval?

mizvalentine — Thu, 23 Aug 2012 17:18:49 GMT

Sorry yes, I should've said, going for FHA 203(b).

I am so glad to hear that about the cash reserves...when I first told the LO about the gifts he said that was fine and common, but I wasn't sure if my poor cash assets made me look like a bad risk.

Thank you for putting my mind at ease!

Re: Do they look at your bank accounts during preapproval?

webhopper — Thu, 23 Aug 2012 17:27:42 GMT

You should be fine. Keep in mind that your parents will likely have to provide their bank account statements so that the lender can source the gift funds. Also, you're allowed to ask for a sellers credit for closing costs. Your scores are perfectly acceptable for FHA programs

Re: Do they look at your bank accounts during preapproval?

mizvalentine — Thu, 23 Aug 2012 17:45:12 GMT

Thank you as well! Its great to be reassured while sitting here waiting for "the call"...

And I am REALLY hoping for that seller's credit. The LO said he sees 'a lot' of sellers around here offering up to 6%, and 90% of all sellers offering at least some closing credit. Its crazy how high the total cash up front can be if you don't get that credit...yet another thing keeping me up nights.

Re: Do they look at your bank accounts during preapproval?

mizvalentine — Thu, 23 Aug 2012 20:01:24 GMT

PREAPPROVED! For $400k!? This is amazing...ten years ago my credit was in the low 500s. Credit repair works, for sure.

I wonder if the final approval will be anywhere near that?

Re: Do they look at your bank accounts during preapproval?

nc — Thu, 23 Aug 2012 20:22:07 GMT

WOW congrats..

Pre approval amount looks high to me based on your salary. I would just say borrow responsibly.

Re: Do they look at your bank accounts during preapproval?

tooleman694 — Fri, 24 Aug 2012 03:46:45 GMT

400k seems way high, my income is twice yours and 400k would be too much for me..

Re: Do they look at your bank accounts during preapproval?

Anonymous — Fri, 24 Aug 2012 07:28:49 GMT

Yeah it sounds way high...my annual is around 70K and I was preapproved for $175,000.

Re: Do they look at your bank accounts during preapproval?

webhopper — Fri, 24 Aug 2012 15:44:31 GMT

@Anonymous wrote:
Yeah it sounds way high...my annual is around 70K and I was preapproved for $175,000.

I agree, 400k sounds really high... I agree, borrow responsibly... don't be house poor.

Re: Do they look at your bank accounts during preapproval?

mizvalentine — Mon, 27 Aug 2012 14:08:41 GMT

Oh god yes, there's no way I'd borrow the full amount.

I only wanted $200k, on a multifamily (so with rental income to offset)... no way I'm getting myself back into debt and bad credit!

But it was nice to be approved for something after struggling so long to get myself back to credit health.

Re: Do they look at your bank accounts during preapproval?

webhopper — Mon, 27 Aug 2012 19:48:07 GMT

@mizvalentine wrote:
Oh god yes, there's no way I'd borrow the full amount.
I only wanted $200k, on a multifamily (so with rental income to offset)... no way I'm getting myself back into debt and bad credit!
But it was nice to be approved for something after struggling so long to get myself back to credit health.

Good luck! I bought a multifamily home in 2008. One of the better decisions that I've made in my entire life.

I'm refinancing the property now (points to siggy). I've moved on to a single family home, and kept the multifamily as a rental, after the refi I will have a positive net cash flow of about $900 per month.

Re: Do they look at your bank accounts during preapproval?

mizvalentine — Mon, 27 Aug 2012 19:54:43 GMT

Wow, nice! Good luck with the refi... That sounds very similar to what we want to do. The rental market here has been consistently strong and getting stronger so I'm cautiously confident of our success... rents keep going up and its starting to bring sales prices with it, so we feel like its the right time to make the investment.

Still, I don't want to spend any more than I could pay if I had to carry the whole building by myself. Hope for the best and plan for the worst!

Re: Do they look at your bank accounts during preapproval?

webhopper — Tue, 28 Aug 2012 04:48:41 GMT

Haha I always plan for the worst. I planned for me to be jobless; living off my husbands income; he makes less; also for both houses to be vacant lol I'm holding title to both houses as an individual; I wasn't married earlier this year and I wasn't married in 2008 either. The refi will be awesome; I cant wait! Be aware of the potential rent bubble. Ive heard discussion about the possibility that current rental rates are not sustainable in the long run; but as you are aware; rental markets are mostly a local affair. I joined American apartment owners association for guidance and education on being a good landlord and property manager.

Re: Do they look at your bank accounts during preapproval?

tooleman694 — Tue, 28 Aug 2012 13:38:31 GMT

Hoping for the best and planning for the worst, can make a nice safety net. But sometimes you gotta take on some risk.

While I agree that you should not be house poor, I would still stretch it a bit and buy more home. It will pay off in the long run.

If you work hard, the home you buy today at a stretch should be a super easy payment to make in like 5 years.

I remember when I was in my early 20s, my Wife and I wanted to buy small but the inlaws thought it was a terrible idea (they are self made millionaires) and told us to buy bigger. We took their advice and bought bigger, turns out they were right. Things were kind of tight for a while, but after time it came easy. When we sold this year we made a ton of cash off the home. We are now moving into an amazing home that we could have never of gotten if we didn't listen to her parents.

Re: Do they look at your bank accounts during preapproval?

mizvalentine — Tue, 28 Aug 2012 13:45:20 GMT

This is a great point too. That said, we just left Boston where most of our friends are having to spend $300k+ just to get duplexes and condos... Here in Pittsburgh, our friends of similar income think we're totally insane to take on anything more than $150k because you can get a lovely multifamily for about that here, and gorgeous single families for under $100k. But we're buying "up" in terms of size (going for a triplex), lot (looking for something that has front, back and side yards--a lot of the houses here are right on top of each other) and neighborhood (thinking this will make renting easier and get us better rents and eventual resale). So, we're buying "cheap" by our Boston mindset but "up" for the area...which works out to right about my comfort zone

Re: Do they look at your bank accounts during preapproval?

webhopper — Tue, 28 Aug 2012 15:17:48 GMT

@mizvalentine wrote:
This is a great point too. That said, we just left Boston where most of our friends are having to spend $300k+ just to get duplexes and condos... Here in Pittsburgh, our friends of similar income think we're totally insane to take on anything more than $150k because you can get a lovely multifamily for about that here, and gorgeous single families for under $100k. But we're buying "up" in terms of size (going for a triplex), lot (looking for something that has front, back and side yards--a lot of the houses here are right on top of each other) and neighborhood (thinking this will make renting easier and get us better rents and eventual resale). So, we're buying "cheap" by our Boston mindset but "up" for the area...which works out to right about my comfort zone

If you find something that is "cheap" for your area... go for it.

I had looked from Nov 2007 through to Feb 2008 before I found something that I wanted to offer on. I checked listings daily. At that time, the average listing price for a duplex was 225k - 234k and these were several miles from my work, and I didn't like the street configuration in those neighborhoods and on the main streets because it was one-lane each way instead of two lanes each way with a turning lane in the center. Something as minor as street configuration can make a huge impact on your daily quality of life? I mean who wants to stress out while driving to work every day!!! I would rather relax and drink my coffee. I'll never forget. On a tuesday, I noticed a new listing... 179k for a duplex that was larger than the ones I had been looking at.

I made arrangements with the listing realtor that day to view the house. While I was looking at it, she was on the phone with different investors and was also checking with the current tenants to see if they could make arrangements so that she could show the house to other people. I felt like it would be stupid to not offer, especially since the house had some great architectural features that are hard to find (vaulted ceilings, open balcony into the living room, clean architecture lines. Double walk in closets in the master bedroom. I put an offer in on the house on that very day, for 175k at 5:30 PM. By 7:45PM I got the word from my realtor that my offer was accepted. No one else ever got to even see it. Because home values have steadily gained in my town (instead of dropped) and because comparable duplex sales are happening in the 220 - 230k range within a mile radius of mine (these are for non-updated properties) , I've gained about 52k worth of equity in 4 yrs of letting other people help pay the note via rent. Granted, I've spent some money in upgrades on the property since I bought it, paying cash as I go.