Sketchy Pre-Approval?

posted 3 years ago in Home
Post # 3
Member
1689 posts
Bumble bee
  • Wedding: May 2014

Preapproval is easy to get.  All we needed was a credit report and to answer a couple questions about our income.

A commitment letter takes a lot more paper work and is way more legally binding.

Good luck house hunting!!

Post # 4
Member
1689 posts
Bumble bee
  • Wedding: May 2014

Also, knowing your credit and your income, he can approve you for a payment up to 40% of your yearly salary.

My FI and I were preapproved for an amount over twice the actual amount of our home

Post # 5
Hostess
4941 posts
Honey bee
  • Wedding: May 2013

@KateByDesign:  Exactly what PP said, pre-approvals are easy to get. DH and I got approved for about 40k more than we wanted to spend, so just keep in mind that just because they approve you for so much, doesn’t mean you have to get anywhere near it. 

Post # 6
Member
10384 posts
Sugar Beekeeper
  • Wedding: September 2010

Different banks did it differently for us (and you should definitely be shopping around – do not just get preapproved from one place). Pretty much everyone checked our credit and made us fill out a form about income, assetts, etc etc. Most didn’t check the numbers themselves, but did say that obviously if we gave them bad info, that come loan approval time, the preapproval could be meaningless if we inflated our incomes, didn’t declare debt, etc etc.

Post # 7
Member
182 posts
Blushing bee

@KateByDesign:  We just bought our first house and that’s what happened with us.. small amount of information and we got the preapproval, once we found a house and made an offer they ran the numbers with the more in depth financial information, and it changed the amount we were approved for (it actually went up) but it wasn’t a drastic change. The preapproval is genuinely just used in the offer process, once they receive an accepted offer the fun starts with everything else. I’d say that’s pretty typical of most lenders. 

Post # 8
Member
2642 posts
Sugar bee
  • Wedding: September 2012

@KateByDesign:  That sounds about standard.  They run a credit check and you answer a few questions.  I think we submitted how much we made monthly, but didn’t have to provide any proof.  We didn’t submit pay stubs, W-2s, employment records, etc. until we applied for the actual loan.  We got pre-approval at 2 places (a credit union and a mortgage company) and the process was pretty much the same for both.

I wouldn’t worry about it too much.  Odds are what you were approved for is not what you can really, comfortablly afford.  Figure out what you can afford and use that as your max budget, not what you were pre-approved for.

Post # 9
Member
11740 posts
Sugar Beekeeper
  • Wedding: November 1999

To get a real pre-approval, you should be giving in all the documents you planned (I just did this a few weeks ago – in Virginia too, in case people say state-to-state varies).   60 days of paystubs, bank statements, W2 and all schedule for 2011 and 2012, consent for credit searches, etc.  It sounds to me like you got a pre-qualification – which does just run credit scores and stuff, which isn’t binding at all. 

Pre-approval basically gets you 90% through the mortgage process, whereas pre-qualification barely gets you started.

Post # 10
Member
7281 posts
Busy Beekeeper
  • Wedding: October 2011 - Bed & Breakfast

Maybe it’s a state thing. Like a PP, we worked with 4 different lenders during our house hunt (2 on round 1 and 2 on round 2). All 4 lenders requires 60 days worth of pay stubs, 3-4 months of bank statements for all bank accounts, 2 years of W2s, and at least 2 years of tax returns just for pre-approval (one lender required 3 years of tax returns).

I will also 2nd the suggestion to talk with multiple lenders right now. Shop around and make sure they all pull your credit report within a single 30-day period of time. Ideally you should get approved by 2-3 lenders and work with them throughout your house shopping experience. Then, once you are under contract and ready to move forward in securing financing, you can bid those lenders against each other in order to get the lowest rate and best terms available. If you have a good down payment, solid work history, and good credit they will work their butts off to get your business. Make that work in your favor. Never be afraid to ask, “Is that the best rate that you can give me?”

Post # 12
Member
11740 posts
Sugar Beekeeper
  • Wedding: November 1999

@KateByDesign:  We worked with a mortgage broker to get preapproved.  That way, they compare tons of different lenders for you and find you the best rates/point combinations.  They will also tell you how much they will authorize a loan for.  You submit all the documentation you need, so when you find the house you want to buy, all you have to do is update some documents (namely, bank statements and pay stubs) and then the loan officer can send your stuff to the underwriters for approval.  

The broker we used knew everything and spent hours on the phone with us answering any question we could come up with, plus offering advice from what she knows about the market and what she’s observed in our area.

To begin the process, you would just select a broker or lender you want to work with.  Most post their general rates online, but they change based on credit scores, downpayment amount, etc.  Personally, we didn’t shop around for different lenders because having a mortgage broker actually did that work for us.  At the end they presented us with our best-fit loan, plus the lowest interest rate loan and highest rate loan we qualified for.

If you have any other questions and don’t want to write them out here, feel free to PM me!  

Post # 13
Member
10384 posts
Sugar Beekeeper
  • Wedding: September 2010

@KateByDesign:  You do NOT need to committ to a bank to get pre-approved. You should get pre-approved by several banks to shop around. You should specifically ask the bank whether you were pre-qualified or pre-approved. We were definitely pre-approved (not pre-qualified) with a couple of banks that did what yours did. I know that because the bank we ended up going with was one of them, and they gave us a pre-approval letter. Did you get a letter that states you were pre-approved, or pre-qualified?

Post # 14
Member
10384 posts
Sugar Beekeeper
  • Wedding: September 2010

@abbie017:  I actually recommend against a martgage broker. It is an unnecessary cost (as they either charge a fee or if they don’t, direct you to lenders who pay them for their business). If someone has a relatively straightforward application (good credit, decent down payment, etc etc) there’s no reason to add yet another expensive middle-man to the process. It was not a big deal for us to shop around on our own. We got an APR of less than 3.3% and reduced closing costs by doing so on our own.

Post # 15
Member
203 posts
Helper bee
  • Wedding: September 2012

We were pre-approved for an amount that was 2x what we were comfortable paying.  Remember that most brokers work on commission, so the more that you borrow, the more they get paid.  First, figure out what you’re comfortable paying, then talk to several lenders to find out which is going to give you terms that meet your needs.  Don’t rely on a broker!  It’s their job to sell you something, not to look out for your best interest.  Be your own advocate.

Post # 16
Member
11740 posts
Sugar Beekeeper
  • Wedding: November 1999

@crayfish:  I’m glad it worked out for you.  The times of the 3.3% APRs are gone, and in a time where rates are falling around 4.6%, I got a rate similar to yours with a credit through points that contributes towards my closing costs.  I also did not pay the mortgage broker, so I’m not sure which “expensive middle man” fees you’re referring to – brokers are paid by the lender, on a negotiated industry-wide flat rate. 

I’m not saying one is better than the other, but there are different options out there than going to a bank.  I’m very happy about the rate we got, and the points we acquired, and the broker we used.  It may not be your cup of tea, but I just think it’s unfair to say you “caution against it” when I assume you haven’t used one so have no real experience with it.  I got a better rate than several other couples I know who are also buying now because of the broker.  Different strokes for different folks, you know?

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