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How Solid Is Your Pre-Approval Letter
How Solid Is Your Pre-Approval Letter? How reliable is your pre-approval letter? What does a loan officer do during the qualification and pre-approval process before the pre-approval letter is issued? How long does the pre-approval letter take? Can you get denied for a mortgage loan after the pre-approval has been issued?
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3 Replies
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A pre-approval letter is undoubtedly one of the critical steps to consider before buying a house. This letter indicates that some mortgage lenders have reviewed the finances and decided how much to lend. However, the validity of such a letter and the trust one can put into it is considered, and understanding the pre-approval process helps an individual determine how tough their pre-approval is.
How Strong Is Your Pre-Approval Letter?
The degree of pre-approval letter solidity achievable to the applicant is mainly based on the extent of the documentation received by the lender. A strong pre-approval letter argues that the lender has taken measures to understand your compliance documents, specifically the credit history report, income, assets, and liabilities. When the pre-approval was done for all the needed and validated paperwork, this is almost always a good guess, and sellers do not doubt this loan will be guaranteed.
However, it should always be kept in mind that the pre-approval letters are not unwritten rules. Market forces, the influence of financial alteration, or additional underwriting may occasion these approval status changes. There is a right and wrong way to identify such types, and the types of approvals or what such statement implies in the mortgage application process are sought and understood.
Loan Officer Pre-Approval Stage Functions
The loan officer:
Pulls and Evaluates Your Credit Report: To improve the course of action, the loan officer retrieves the credit report for a score projection and checks the applicant’s history, pinpointing risky items like defaulting, having previous collections, or being over-levered.
Determines Your Income Qualifications: This will also assist in substantiating income, such as IRS forms, salary statements, W-2s, and proof of additional income, e.g., bonus pay, rent, and other documents. The loan officer uses this information to calculate your debt-to-income (DTI) ratio.
Verifies Your Assets: The loan officer reviews pay stubs, tax returns, or bank statements and eliminates accounts that do not possess sufficient funds for a down payment, closing costs, or reserves.
Examine Your Debt Obligation: A car loan, student loans, and credit cards, for example, will also be taken into account as such will have a bearing on the DTI and total debt, including the mortgage, that one can sustain. An average loan officer assumes or predicts a borrowing limit for a customer, which is then used to issue a pre-qualification letter.
How Long Is the Waiting Period for the Pre-Approval?
The pre-approval process could take several hours or even days. The loan officer or mortgage underwriting issuing a borrower a pre-approval letter is based on how fast you were in furnishing the required paperwork to the lender. While you may get instant online pre-approval from some online lenders, it may take longer for traditional lenders to evaluate your application.
Are There Instances When a Person is Preapproved for Mortgage Only to be Turned Down Later?
This is true; hence, a mortgage might be denied even after a borrower has been preapproved. A few of the reasons for such circumstances are:
Changes in Financial Situation: After obtaining pre-approval from a lender, if you become jobless, take on extra debts, or go through credit score haircuts, the underwriting body may refuse to honor the preapproved conditions.
Filled Information Errors: If the information you provided during the pre-qualification details is incorrect or inappropriate, or the lender is unable to justify some areas, your approval could be withdrawn.
Property Problems: Some reasons, such as property appraisal issues, the type of the property, or ineligible conditions of the property, make the house you wish to buy unfinanceable, which can also result in rejection.
Settlement Underwriting Problems: Such underwriting processes are severely crippling to homeowners, yet their successful completion is made complicated. This is because people are very successful in their prediction based on those properties that have been preapproved. The said underwriting, which is much later, faced what is sometimes called armchair underwriting in hindsight.
It is also a great point of reference when one has a pre-approval letter, yet this does not mean that a mortgage approval will be forthcoming in totality. It is also very useful to understand what pre-qualification means and how the borrower can, even after this, remain financially capable of applying for the mortgage that has been preapproved to move to full approval.
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This reply was modified 2 months, 3 weeks ago by
Gustan. Reason: Spelling error
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This reply was modified 2 months, 3 weeks ago by
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The qualification and pre-approval stage of the mortgage process is the most important step of the entire mortgage loan process. One of the reasons why there is stress or a last minute mortgage loan denial of borrowers is because the loan officer did not properly qualify and pre-approve the borrower. Unfortunately, many loan officers do not thoroughly review the borrower’s mortgage loan application, run credit, review income docs and tax returns, and run the automated underwriting system before issuing a pre-approval. Believe it or not, many loan officers just take the mortgage loan applicant’s word on the income, assets, liabilities, tax liability, credit history, credit tradelines, and credit scores and issue a pre-approval letter. By doing so, the entire home buying and mortgage process gets thrown into a loop and chaos happens where there is unlimited stress during the entire mortgage process. The consequences can lead to stress during the mortgage process, delays in closing, and a last minute mortgage loan denial.
https://gcamortgage.com/mortgage-after-conditional-approval/
gcamortgage.com
Getting Denied For a Mortgage After Conditional Approval
If you got denied for a mortgage after conditional approval, look at non-QM loan options such a no-doc, and DSCR loans, and bank statement loans.
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My name is Danny Vesokie, and I am the President and Chief Executive Officer of Affiliated Financial Partners, headquartered in Sacramento, California. Affiliated Financial Partners is a nationwide Commercial Loan Officer Training School and one of the key factors we stressto all our Commercial loan officer students is the importance of pre-approval process. Unless you want to end your career and ruin your reputation take your time in qualifying and preapproving your loan applications. Any loan officers or real estate agents who want to start your own commercial loan brokerage business please get in touch with me at Affiliated Financial Partners, Inc. We are members of the Better Business Bureau and work closely with Lending Network and Gustan Cho Associates. My email address is danny@afp.com.
