This Article Is About Buying Home Without Solid Pre-Approval And AUS Findings
Buying Home Without Solid Pre-Approval and without Automated Underwriting System findings can be a recipe for disaster. For example, for homebuyers who have a prior Chapter 7 bankruptcy, there is a two-year waiting period for FHA and VA Loans before being eligible for an automated approval by Fannie Mae’s Automated Underwriting System. For home buyers with a prior foreclosure, deed in lieu of foreclosure, or short sale, there is a mandatory waiting period of 3 years to be eligible for an FHA loan via Fannie Mae’s Automated Underwriting System.
Home Buyers with a deed in lieu of foreclosure or a short sale are eligible for an automated approval via Fannie Mae’s Automated Underwriting System for a conventional loan after 4 years. Many home buyers get antsy and start looking for a home about six months or earlier prior to their waiting period is over and without an approve/eligible per AUS assuming that once the waiting period is over, they are all set.
Importance Of Automated Findings During The Pre-Approval Process
Buying Home Without Solid Pre-Approval prior to the waiting period being over is risky:
- Shopping for a home is fine but entering into a purchase contract can be a risky move
- Most sellers will want to close on the sale of their home no later than two months from the date they enter into a purchase contract
- The problem this creates is that lenders cannot work on mortgage applications without automated approval from Fannie Mae’s Automated Underwriting System
- On another note, just because the waiting period has passed does not mean borrowers are guaranteed an automated approval
Automated Underwriting System
Borrowers should not automatically assume they will get a guaranteed automated approval via Fannie Mae’s Automated Underwriting System just because of passing the waiting period requirements.
The Automated Underwriting System is a sophisticated computer system that will take into effect borrowers following data:
- income, debts
- liabilities
- credit scores
- credit pattern from the date of bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale
The Automated Underwriting System will especially pay special attention to see whether borrowers have established credit trade lines for at least a year:
- Will watch for late payments after bankruptcy and/or foreclosure
It will analyze all information stated on the mortgage application before it renders an automated approval.
Risks With Buying Home Without Solid Pre-Approval And AUS Findings
Home Buyers entering into a real estate purchase contract should have an iron-clad real estate contract. The contract should have contingencies where they can get their earnest money back in the event of a mortgage denial. It will be up to home buyers whether or not to hire home inspectors, pest inspectors, or other specialty inspectors prior to automated approval. Home Buyers need to realize that mortgage applications will remain in idle mode until the waiting period has elapsed.
Related> Automated Underwriting System: Case Scenario
