Beware of the term PRE-APPROVAL!
Here are some facts:
- Pre-approvals mean something different to every mortgage professional and lending institution
- For mortgage approvals both the applicants AND the property they are buying need to be adjudicated and approved before funds are advanced…detailed borrower information and documents are typically required for a full pre-approval, however property info is seldom available. For this reason a full blown adjudicated pre-approval is very difficult to obtain
- Many lending institutions will not adjudicate pre-approvals, and many others charge rate premiums to do so
- Applicants’ assets, liabilities, and income need to be verified in writing before a mortgage can be approved…many mortgage agents don’t even pull credit or verify employment and down payment before issuing a pre-approval
- For a high ratio mortgage (less than 20% down), both the lending institution AND the default insurer must approve the lender and the property….default insurers will only adjudicate live applications
- Rate holds and pre-approvals are different everywhere….rate holds seldom include any form of verification or viewed documents
- In a rising interest rate environment, a previous pre-approval may no longer be acceptable due to excessive debt service ratios based on the current higher rate
- For very long closings over 90-120 days, assets, liabilities, and income may need to be fully verified again prior to closing
- Approved mortgage amount is always based on the lesser of the purchase price OR the appraised value…any shortfall from an appraisal needs to be made up by client