topic Re: Conditional Loan Approval for New Construction in Mortgage Loans

Conditional Loan Approval for New Construction

Anonymous — Sat, 24 Apr 2021 13:49:44 GMT

Hello,

I have a quick question about new construction and loan approvals. I've asked my loan officer but I can't seem to get a clear answer to understand what is being asked of us from the builder.

We recently entered a contract to build a new construction home that will be ready in 10 months. The verbiage of the contract sounds like I will need to go through complete underwriting for their requirement of "conditional loan approval" but he is saying that approving us through the DU, which he already did, should suffice for the requirement. Below is the verbiage from the contract:

5.3 Loan Approval. Buyer shall use good faith efforts to obtain as soon as possible, but no later than 45 days after the Purchase Agreement Date (“Conditional Loan Approval Deadline”), a written statement from Buyer’s Lender stating: (i) Buyer has been approved for a loan in the amount necessary to purchase the Property, and (ii) all conditions necessary for Buyer’s Lender to fund the loan (“Notice of Conditional Loan Approval”). Buyer shall promptly deliver a copy of the Notice of Conditional Loan Approval to Seller.

In other people's experiences, is DU approval sufficient to satisfy this requirement or will we have to go through the underwriting process. He told us that he wouldn't be able to accommodate pushing us through actual UW since it's so far out.

Re: Conditional Loan Approval for New Construction

tooleman694 — Sat, 24 Apr 2021 17:29:32 GMT

They typically just run you thru DU, then about 2 months before closing you do actual underwriting and thats where all the fun starts.

Re: Conditional Loan Approval for New Construction

Anonymous — Sat, 24 Apr 2021 18:19:41 GMT

@tooleman694 Ahh ok thank you! I sent that preapproval letter to my builder that stated amount preapproved for, type of loan, the fact is was run through the Fannie Mae/Freddie Mac AUS and some typical conditions like : satisfactory proof of down (which we gave as EM), conveyance of clear title, satisfactory purchase contract, and no change in credit status. They seemed to have accepted this as the application of mortgage but are still waiting on the conditional approval. Isn't that what that is then?

Re: Conditional Loan Approval for New Construction

CreditCuriosity — Sat, 24 Apr 2021 18:29:14 GMT

Going through a new construction as well and builder preferred lender ran me all the way through conditional approval which i got last week. About 2 months out as mentioned they will do alot of it again although should be more quick the second time around as they have all the documentation being w'2, tax transcripts, letters from employer saying i can move states, etc. They will certainly request tax transcripts for 2020 and new updated bank statements and some other stuff, but at least I got all the stuff uploaded. Very small conditions on mine 2 LOE's on inquiries which will be of no concern when loan actually funds and obviously appraisal and insurance etc.. really no real conditions other than 2 LOE's which as mentioned probably won't even have to provide when house is eventually done in about 10 months as well.

Re: Conditional Loan Approval for New Construction

Anonymous — Sat, 24 Apr 2021 19:33:52 GMT

Was your conditional approval just a DU approval with docs submitted or did you go thru an actual underwriting?

Re: Conditional Loan Approval for New Construction

CreditCuriosity — Sat, 24 Apr 2021 20:27:37 GMT

@Anonymous wrote:
Was your conditional approval just a DU approval with docs submitted or did you go thru an actual underwriting?

Actually went through UW meaning loan processor and actual UW went through loan/file. Took UW about a week once passed over to them. Had an immediate AUW on day one. Whole process took about 1.5 months to get to conditional approval where it will stay until two months out of closing partially due to my loan not needing priority and the housing market in general. Have very strong credit and have owned homes, etc.