topic Re: Pre-Approved! in Mortgage Loans

Pre-Approved!

songsofexperience — Wed, 20 Aug 2014 17:17:16 GMT

Found a local lender and after a bit of back and forth regarding the FHA Back to Work Program I have a pre-approval: "We have you approved for an FHA loan with a sales price of $160,000. If you find a USDA eligible house we will try that program and see if we can get you approved. The pre-approval is contingent on underwriting and FHA approval, but our underwriting machine did approve your loan."

$160,000
Rate: 4.37% but no rate lock until I sign a purchase contract. She says the rates have been changing between 4.25% and 4.375% so fingers crossed it doesn't jump in the next 2 months!
I was told it is very common here for the seller to pay closing costs and also the prepaids at closing. I'm waiting on the fee sheet.

They also want to see I have the downpayment funds, I think by the time I put in the purchase contract - trying to get clarification. I assume this is usual? Problem is, right now I have about $2k. I was going to add $1k in September and $2500 by October 15th so I'd have it by closing, assuming a 60-90 day time-line, but not necessarily by the time I put in a purchase contract. Of course, I don't actually want to spend $160k! That's at the very top of my comfort level. Moot I suppose if I go USDA. "Gift" funds do not need to season, correct? And it's better to get a check than a bank transfer for these? Just in case I need to . . . .

I hope it is smooth sailing from here on out.

I imagine their underwriting machine looks something like this and that it speaks with the voice of Hal.

Re: Pre-Approved!

DallasLoanGuy — Wed, 20 Aug 2014 18:23:29 GMT

@songsofexperience wrote:
Found a local lender and after a bit of back and forth regarding the FHA Back to Work Program I have a pre-approval: "We have you approved for an FHA loan with a sales price of $160,000. If you find a USDA eligible house we will try that program and see if we can get you approved. The pre-approval is contingent on underwriting and FHA approval, but our underwriting machine did approve your loan."

$160,000
Rate: 4.37% but no rate lock until I sign a purchase contract. She says the rates have been changing between 4.25% and 4.375% so fingers crossed it doesn't jump in the next 2 months!
I was told it is very common here for the seller to pay closing costs and also the prepaids at closing. I'm waiting on the fee sheet.
They also want to see I have the downpayment funds, I think by the time I put in the purchase contract - trying to get clarification. I assume this is usual? i approve people all of the time 'subject to' cash to close. so this is normal. Problem is, right now I have about $2k. I was going to add $1k in September and $2500 by October 15th as long as those funds are 'acceptable' then you are fine saving up so I'd have it by closing, assuming a 60-90 day time-line, but not necessarily by the time I put in a purchase contract. Of course, I don't actually want to spend $160k! That's at the very top of my comfort level. Moot I suppose if I go USDA. "Gift" funds do not need to season, correct? And it's better to get a check than a bank transfer for these? Just in case I need to . . . .

I hope it is smooth sailing from here on out.

I imagine their underwriting machine looks something like this and that it speaks with the voice of Hal.

Re: Pre-Approved!

peepers — Wed, 20 Aug 2014 18:47:51 GMT

I have nothing to offer advice wise, however I want to say the picture of the "underwriting machine" accompanied by the voice of Hal is epic! I literally spit diet dr. pepper on my screen. Good luck in the home buying journey!

Re: Pre-Approved!

songsofexperience — Wed, 20 Aug 2014 19:04:21 GMT

Thanks Dallas - yes, she said it the approval would be on condition of funds to close and I would need to have proof of this before it goes to underwriting so I actually wouldn't necessarily have all the time I need to save up.

It's been a while since I've done this so I'm trying to get the steps straight in my mind.

1. I have my pre-approval

2. I find a house, make an offer, its accepted. I do an inspection somewhere in here!

3. I inform the lender and provide them with the sales contract - is this the stage at which I need to have proof of funds to close?

4. An appaisal is ordered

5. Application for that home goes to UW - or is THIS the stage at which I need to have proof of funds?

are 4 and 5 reversed?

6. Loan approved - CTC

7. Close!

Re: Pre-Approved!

songsofexperience — Wed, 20 Aug 2014 19:05:13 GMT

@peepers wrote:
I have nothing to offer advice wise, however I want to say the picture of the "underwriting machine" accompanied by the voice of Hal is epic! I literally spit diet dr. pepper on my screen. Good luck in the home buying journey!

My job here is done. Goodnight everyone

Re: Pre-Approved!

ShanetheMortgageMan — Fri, 22 Aug 2014 01:49:19 GMT

You are not pre-approved yet (or at least not properly pre-approved). You got an automated underwriting approval because your foreclosure doesn't report on your credit report as you said in previous posts. If a foreclosure occurred within 3 years, it's automatically downgraded to a manual underwrite. Since you are also applying for Back to Work, the underwriter will need a significant amount of documentation before they can approve you. So before you make an offer you should absolutely insist that the underwriter does a full review on all of your documentation to confirm you are definitely approved under the Back to Work guidelines. Any loan officer who issues a pre-approval for Back to Work without the underwriter reviewing the loan should be flicked in the forehead.

Re: Pre-Approved!

DallasLoanGuy — Fri, 22 Aug 2014 02:05:18 GMT

@ShanetheMortgageMan wrote:
. Any loan officer who issues a pre-approval for Back to Work without the underwriter reviewing the loan should be flicked in the forehead.

i agree 100%

Re: Pre-Approved!

songsofexperience — Fri, 22 Aug 2014 02:50:54 GMT

@ShanetheMortgageMan wrote:
You are not pre-approved yet (or at least not properly pre-approved). You got an automated underwriting approval because your foreclosure doesn't report on your credit report as you said in previous posts. If a foreclosure occurred within 3 years, it's automatically downgraded to a manual underwrite. Since you are also applying for Back to Work, the underwriter will need a significant amount of documentation before they can approve you. So before you make an offer you should absolutely insist that the underwriter does a full review on all of your documentation to confirm you are definitely approved under the Back to Work guidelines. Any loan officer who issues a pre-approval for Back to Work without the underwriter reviewing the loan should be flicked in the forehead.

Thanks Shane. Excellent point as always.

I gave them tax returns and W2s from the years I was affected by unemployment as well the last couple of years to show recovery. They also got my counseling certificate and all the usual documentation (bank statements, pay stubs etc). They asked for an LOE for the FC and paid collections as well as an LOE regarding why I have not been paying rent for the last 2.5 years. They do all UW and funding in house so she said the underwriter looked at everything, verified the loss of income, looked at the LOEs, and so on. She did make it clear that although their underwriter had "approved" and their "machine" had approved, it would still be subject to final UW and FHA approval.

I think what she's saying is that they will fund the loan if FHA approves.

I know I'm a long way from home (no pun intended), but very grateful for the support and advice of the community here!

Re: Pre-Approved!

ShanetheMortgageMan — Fri, 22 Aug 2014 04:49:29 GMT

Did you provide your job severance/income reduction paperwork too?

Only time FHA (it's actually HUD) would review is if you need to get a CAIVRS removal for a prior FHA foreclosure. So you may want to get clarification on what FHA (HUD) would actually be approving.

Re: Pre-Approved!

songsofexperience — Sat, 23 Aug 2014 00:34:09 GMT

@ShanetheMortgageMan wrote:
Did you provide your job severance/income reduction paperwork too?

Only time FHA (it's actually HUD) would review is if you need to get a CAIVRS removal for a prior FHA foreclosure. So you may want to get clarification on what FHA (HUD) would actually be approving.

Yes, and I provided my unemployment benefits info and 1099Gs for 2009 and 2010.

My FC was on a conventional mortgage so no CAIVRS.

Re: Pre-Approved!

ShanetheMortgageMan — Sat, 23 Aug 2014 01:02:18 GMT

So what would HUD be approving then?

Re: Pre-Approved!

songsofexperience — Sat, 23 Aug 2014 11:41:41 GMT

@ShanetheMortgageMan wrote:
So what would HUD be approving then?

I don't know. She may have just meant that the DE underwriter would need to give final approval. I was under the impression, from what she'd said, that the DE underwriter had already looked at the file and that they'd also run it through automatic underwriting. Obviously, with BtW it has to be a manual UW . . . .

USDA Guaranteed loans have to be sent to an USDA for UW, correct? This is why it can take so long? Another lender I spoke to said that if I went USDA first and it was denied and switched to FHA, I'd have to get a brand new appraisal. He was saying that back in the day, you typically knew the appraiser and would call and ask her/him to flip it from one to the other for a small fee, but now, you typically end up having to pay full price for two appraisals. He was also saying with USDA you just have no idea until you submit the full package, whereas with FHA you can get a sense of where a borrow stands and what the chances are.

If I did decide to try USDA with extenuating circumstances and got denied so switched back to FHA, do you think the time frame to do that would be an annoyance to the seller or would having something in the contract that allows for a longer period of time to secure financing be acceptable?

Re: Pre-Approved!

ShanetheMortgageMan — Sat, 23 Aug 2014 15:51:44 GMT

It's just a weird choice of words is all. Perhaps they mean nothing, or perhaps they mean just a preliminary review was done and the more in depth review will come after you are under contract. Honestly it's difficult to tell.

USDA loans are sent to USDA after the lender reviews and approves everything. USDA reviews to make sure the loan meets requirements and all documentation they feel is needed has been supplied, although sometimes they do make a call on if a loan can be approved or not (but that is rare, although if trying to get approved via an extenuating circumstance then USDA will likely be reviewing to make sure the circumstance is deemed extenuating by them). The review time that USDA has depends on the state, but yes they can be pretty long (most states are 3-4 weeks for USDA to review).

Correct, FHA appraisals have the FHA case # listed on them and must be done after the FHA case # is ordered. So any other type of appraisal done before the FHA case # is ordered wouldn't be able to be used. However FHA appraisals can be used for USDA.

If the seller is prepared for you to go through the USDA process, and then it is determined that it needs to be flipped to FHA later, then that process wouldn't take too much longer... perhaps a couple extra weeks. I could see a seller being OK with that.