Loan (pre) Approval vs. Loan Commitment

lending confusionRealtors work with lots of buyer’s that think the same way about getting a loan.

It comes up too often for me when I’m driving around with buyer’s.  We’ll be talking about a non-warrantable condo, or a property with title issues, or a building that’s not livable or even burning down.

The conversation goes like this:

Realtor  “…you wouldn’t be able to get a loan on that”

Buyer  “Oh,  well…. I’m already approved”

Buyer “My loan officer told me that I’m good, just to tell them when I find the right place and we’ll be done”

This may have more to do with ‘lender spin’, or it could be buyer not reading the documents in their entirety, but that buyer, in most cases, intentional or not, has been misled.

Pre-Approval

Getting Pre-Approved for a loan is the first step in getting the lending process going.  It’s usually a 10 minute phone call to a lender, in which basic information is discussed, like your name, social security number, date of birth, annual income, and length of employment.   While a lender can generally hand out a Pre-Approval Letter after  that discussion, you’re still a long way from banks parting with large sums of money.

What comes next?

Loan Application

The preliminary actions taken to get pre-approval are usually followed up with a commitment to one specific lender by completing a Mortgage Loan Application and providing funds for the homes APPRAISAL.  Some lenders credit the cost of the appraisal back to the buyer at closing, but before ordering the home appraisal, a deposit is typically required.  This is to prevent the home buyer from completing applications from multiple lenders then backing out.

Good lenders take care of preliminary details of processing the application and wait to order the appraisal until after the home buyer is satisfied with building inspections.

Underwriting

Once the appraisal is ordered and recieved by the lender, it is included, along with the application, W2/Income Verification, and any other letters required by the bank and sent to “underwriting”.  The underwriter is the person that looks at everything processed up to that point and will approve, reject, or conditionally approve the loan.  Most loans get some “conditions”, which is ultimately a list of things needed prior to fully approving the loan.  Examples of conditions might be letters of explanation from the appraiser, the borrower’s employer or the borrower themselves.  The underwriters want evidence that they are making the right decision, and often times they want additional documentation.

Loan Commitment

After all the conditions have been met and the application has been approved, lenders in the St Louis area provide a LOAN COMMITMENT to the Realtors.  This is simply a letter  showing that the bank is ready to move forward and make the loan.  The RESIDENTIAL SALE CONTRACT from the St Louis Association of Realtors has a “built in” contingency as part of the contract for loan commitment that gives the buyer the ability to terminate the contract if they are not able to get an approval letter from their bank by the ‘loan commitment date.’

Is St. Louis on your Rank Order List?

 

If You’re graduating Med School this year and are trying to get into the residency program at  SLU, WASH U, St. Lukes, MERCYresidency relocation to St. Louis and St. Mary’s , we’ve prepared a special page on our site specifically to help you – the medical resident, find a home.   As specialist in assisting medical residents find great homes, we’ve learned that recent M.D. grad’s have relatively unique needs for purchasing a great home:

  • quickly
  • move in ready
  • close to the hospital
  • additional services during contract negotiations, inspections and move in

Contact us for a customized search with special driving proximity (or walking proximity) to your residency progam.

We started a section on our website especially for medical residents to help them avoid the pitfalls of home buying that can take place due to their difficult and fast paced process of relocation.  Visit it or pass it on to a medical resident!

St Louis real estate is our specialty! If you’re looking for real estate anywhere in the St Louis, MO area, including St Louis City, Tower Grove, Shaw,  St Louis County, St Charles, Ballwin, Chesterfield, Sunset Hills, Kirkwood, Webster Groves, or one of the other areas we serve, simply click the “Search St Louis Real Estate” link at the top or bottom of this page to begin your home search now.

 

New Year Message to 2018 Home Buyers

New Year home buying

New Years Day has always been an interesting holiday, inherently spent reflecting on my plans, goals and aspirations for the coming year.   This years freeze outside has us inside watching “Texas Flip and Move” on the DIY network.   Watching various groups of low budget, virtually no profit developers go about planning rennovation projects of homes that have to be moved with virtually no professional assistance makes me cringe inside.  After weeks of work, profits are small.   It got me thinking about the home buying process for our normal, non-televised buyers, and what we as Realtors bring to the table.

Surveys from the National Association of Realtors tell us that the buyer perspective is that the number 1 thing buyer’s agents do is find the house.   Obviously finding the right house is important, and Realtors have tremendous resources and opportunities to find homes, but the truth is that finding the house is almost always a team effort.   The role the agent has in the process does vary depending upon how involved the buyer’s want to be, and how much they want their agent involved.   Some buyer’s, despite having help from their buyer’s agent, don’t even look at searches from the agent, but rely on mobile apps or advertising sites like Realtor.com, Zillow and even other agents websites.  The problem with buyer’s doing more leg-work, is that, more often than not, they find homes that are already sold, aren’t for sale, or don’t even meet their own criteria.  On many occasions, a passionate, and even ANGRY client emails me asking, “WHY HASN’T THIS HOME COME UP ON MY SEARCH ?” (from the MLS).   It takes a minute, but with one exception, it is always because the home was excluded because of the limitations the buyer’s have given me, or the home is no longer available.   One time the home was sold 5 years earlier!   After hundreds of experiences and many years in the business, there’s no shortage of stories.  With home buying and selling being such an emotional process, its alway serious business, but in retrospect can be funny too.

No transaction is ever the same, and some buyer’s need support in areas that don’t even exist with other transactions.  From my experience, I say the number 1 thing that we do to help buyer’s is ESTABLISHING A STRATEGY.   To me, this outranks several other super important things we do, like NEGOTIATIONS, house finding, etc. because meeting with a buyer’s agent before the home search process begins and establishing a well thought out BUYING STRATEGY helps the licensed professional to factor in the importance of every facet of the home buying process.   Often times, in establishing a strategy, the agent discovers some of the ideas the buyer may have that are absolutely unrealistic.  Achieving a buyer’s ideals sounds super duper important.   It is, but if they want a condominium in a city where condominiums don’t exist, or they want to build new construction, but don’t have a down-payment, they could be setting themselves up for misery down the road.

So STRATEGIZE.  That’s the deal.  What better time to talk STRATEGY than New Years Day.   

If you know a person interested in starting the buying process, most likely their idea may be to wait until spring time.    Their ideal could be to wait to contact an agent (or not contact an agent at all) until they see the PERFECT HOME at an open house.   To me, this is like showing up at a gun fight -thinking that you’ll have time to shop for a gun.   We experience this all the time.   In today’s market, that’s usually a non-starter.   When we list a property, we first let all our buyers know about it, then post it on agent only “coming soon” sites, then calling or texting our colleagues to let them know what it is and when its coming.  This is the new normal.  During the spring and summer months, we sometimes have multiple buyers lined up before the ink is dry, so at the first open house, we have buyers and agents circling like hungry sharks.   When the unrepresented buyer shows up at the end of the day starting to sheepishly ask questions, it may already be sold.

The point is that if you’re like me, and you’re sitting unprepared home buyer around reflecting on what 2018 brings, and you HAPPEN TO BE considering a home purchase, MAKE THE CALL THIS WEEK!   It doesn’t hurt anyone to plan ahead.  Share you’re ideas with an agent 3-6 months before the search to take advantage of the experience of your soon to be agent and work out a strategy that works in the world that you are buying in.  Sign an exclusive buyer’s agency agreement, so that you’re on the ‘radar’ of a real estate professional when they start hearing about homes that match your ‘perfect home’.    Interestingly, since we’ve been in the business, buyers strategies have changed many times. The market your friend, pastor, personal trainer, psychic, or parents bought in may be TOTALLY DIFFERENT than today’s market, so the strategy they give you might suck.   Don’t make the last one to find out your game plan be your Realtor!

Greetings Holiday Shoppers!

holiday home buyer

Growing up, I watched the story about gifting real estate for Christmas several times per season.  Suprisingly, my first year in real estate, I was concerned that I’d only be able to help home buyer’s during the springtime.   The “seasonality myth” as it’s known in the industry, seems to be propagated by those that start to place focus on holiday parties, family, and worship.  I call that realtors hibernating.    While making this choice isn’t a bad thing for a person,  for a personal decision to affect such an important decision of others, like prospective home buyers, is unfortunate.  Ask any home buyer trying to buy in the springtime and being consistently out bid by $20,000+.   Ask the FHA home buyer that makes offer after offer, but is outbid not by price, but by folks putting more money down and using conventional financing.  Buyer’s need to know that lots of agents are eager to get out in December and January.

One home buyer couple I used to work for seemingly called me every time the weather was snowy and cold.   We’d look at house after house and be grateful we weren’t shopping when prices were higher and people were fighting us for the home, creating bidding wars.

The year 2017 has been a tremendous SELLER’s MARKET, but even in an overall market, there are mini shifts that buyer’s can take advantage of to get better pricing and availability.  So bottom line, if you want to buy…. get out there now and take advantage of the holiday home buying season!

 

St Louis real estate is our specialty! If you’re looking for real estate anywhere in the St Louis, MO area, including St Louis CitySt Louis CountySt CharlesBallwinChesterfield, Sunset HillsKirkwoodWebster Groves, or one of the other areas we serve, simply click the “Search St Louis Real Estate” link at the top or bottom of this page to begin your home search now.

Downpayment Assistance for St. Louis City Buyer’s

freemoneysign

The HomeLift Program funded by Wells Fargo had 23 available downpayment assistance grants open up today and will be gone soon!   If you’re buying a home in St Louis City, take this quiz to see if you qualify!

We have the list of lenders that may be used, since the program itself is a consequence of improper lending actions, the loans don’t have to be originated by Wells Fargo.  Click here for our lenders

March 20 – Match Day for Medical Residents!

Today may be the biggest single day that hundreds of people find out at the same time that they will be living in St. Louis for the next 3-6 years.  Almost like the military giving orders or the NFL draft, new MD’s pick their favorite residency programs and locations, and likewise, the residency programs at SLU, WASH U, St. Lukes, MERCYresidency relocation to St. Louis and St. Mary’s pick their favorites.  The matching service does the rest.

This organized chaos is something we’ve helped medical residents and fellows with for several years.

Truly, a home buying process for a medical resident is nothing like the traditional home buying process.  Without a buyer’s agent that has a unique understanding of the needs fo an incoming resident, there could be problems.

Last week I showed a home in West County.  I was told by the agent that the owner was a physician that had to sell because he had purchased too far away from the hospital.  Another physician we assisted in the selling process had a buyer’s agent that put him in a community he never liked at a price he would never be able to resell in.  Lots of problems can arise if the process isn’t handled correctly.  Knowing the unique criteria and timelines that residents have, along with their special financing requirements is crucial.

We started a section on our website especially for medical residents to help them avoid the pitfalls of home buying that can take place due to their difficult and fast paced process of relocation.  Visit it or pass it on to a medical resident!