Buying Home Without Solid Pre-Approval And AUS Findings

This BLOG On Buying Home Without Solid Pre-Approval And AUS Findings Was UPDATED On August 1, 2017

Buying Home Without Solid Pre-Approval and without Automated Underwriting System findings can be a recipe for disaster. For example, home buyers who have a prior Chapter 7 bankruptcy, there is a two year waiting period before being eligible of an automated approval by Fannie Mae’s Automated Underwriting System.

  • 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 a 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.
  • Buying Home Without Solid Pre-Approval prior to waiting period being over is risky.
  • Shopping for 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 application without an automated approval from Fannie Mae’s Automated Underwriting System. 
  • On another note, just because the waiting period has passed does not mean that mortgage borrowers are guaranteed an automated approval.

Automated Underwriting System

Mortgage Loan Borrowers should not automatically assume they will get a guaranteed automated approval via Fannie Mae’s Automated Underwriting System just because passing the waiting period requirements.

  • The Automated Underwriting System is a sophisticated computer system that will take into effect borrowers income, debts, liabilities, credit scores, and 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 mortgage borrowers have established credit trade lines for at least a year and will watch for late payments after bankruptcy and/or foreclosure. 
  • It will analyze all information stated on mortgage application before it renders an automated approval.

Make sure you have an iron clad purchase real estate contract

Home Buyers  entering into a real estate purchase contract should have an iron clad real estate contract with 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 application will remain in idle mode until waiting period has elapsed.

Related> Automated Underwriting System: Case Scenario

Related> Automated Underwriting System

Related> Difference Between Fannie Mae And Freddie Mac

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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