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How Long Does Pre-Approval Take To Enter Into Purchase Contract

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How Long Does Pre-Approval Take To Enter Into Purchase Contract

This BLOG On How Long Does Pre-Approval Take To Enter Into Purchase Contract Was Written By Alex Carlucci of Gustan Cho Associates

The Pre-Approval stage is the most important stage in the mortgage loan application and mortgage loan approval process.

  • An experienced and diligent mortgage loan officer should carefully analyze the mortgage loan applicant’s income, credit, credit history, income, and assets before issuing a pre-approval letter
  • The pre-approval letter is the ticket for a home buyer to enter into a real estate purchase contract and proceed with the mortgage loan approval process and close on their home
  • If loan originator issues a pre-approval letter without properly qualifying borrower who enters into a real estate purchase contract, borrowers will go through stress during mortgage process
  • If an incomplete not properly qualified mortgage application goes through processing and underwriting it can often be turned down
  • This is how most mortgage loan denials happen

Typically, How Long Does Pre-Approval Take?

Many home buyers who made up to purchase a home needs a pre-approval letter from a mortgage loan originator.

  • This is an exciting time for home buyers and most home buyers are antsy to get a pre-approval letter and start shopping for their dream homes
  • Many times home buyers get discouraged when they contact a mortgage company and the mortgage loan originator does not issue a pre-approval letter within minutes or the same day
  • How long does a pre-approval take? 
  • It depends on the individual mortgage loan borrower
  • All mortgage loan officer can issue a pre-approval letter in minutes of taking a mortgage loan application and running credit
  • However, there is more to that when issuing a solid pre-approval
  • When a mortgage loan originator looks at the mortgage loan borrower’s 1003 mortgage loan application and sees the gross income listed, reviews the credit report and credit scores over 700 plus it should be a no brainer right? 
  • Wrong
  • A good experienced loan officer should collect the following documents:
    • two years tax returns
    • two years W-2s, and most recent paycheck stubs
    • if  borrower had a prior foreclosure or deed in lieu of foreclosure, the loan officer should research the foreclosure and deed in lieu of foreclosure prior to issuing a pre-approval letter
    • If I were a home buyer and counting on a mortgage loan officer to give me a pre-approval letter, I rather wait an extra day or two and make sure the pre-approval letter is solid and valid
    • The wait is worth it than taking a chance of getting a pre-approval letter that is not solid where my mortgage loan process can be halted because my loan officer did not properly qualify me
    • I am sure most mortgage loan borrowers will agree with my point

Income When It Comes To Pre-Approval

Out of the many questions asked on a mortgage loan application is income. Income is the most important factor when it comes to qualifying for a mortgage loan.

  • Borrowers can have perfect credit score
  • But if they do not have qualifying income, they cannot get a mortgage loan
  • Borrowers can have lower credit scores and prior bad credit
  • But as long as they qualify with income, they can get a mortgage loan
  • When borrowers list income, they need to list gross monthly income
  • However, mortgage loan originator needs to see income taxes for the past two years to determine if any unreimbursed expenses
  • Unreimbursed expenses need to be subtracted from your gross income and may affect debt to income ratios
  • Overtime income, part time income, and other income needs to be analyzed as well too
  • Those with overtime income, part time income, or other income for the past two can be used as qualified income
  • If overtime income, part time income, and other income for the past two years but has been declining , it may not be able to use it at all since it is declining income

Two years W-2s are requested by the loan officer.

  • This is because he or she needs to determine the gross income, part time income, and other income on the W2s and make sure there are no deductions
  • Deductions such as forced wage garnishments, child support payments, or other deductions that can affect gross qualified income will affect borrowers qualifications
  • Most recent paycheck stubs are requested to determine year to date income and other deductions as hours worked

With two years tax returns, two years W2s, and most recent paycheck stubs, a solid pre-approval letter can be issued.

Foreclosure And Deed In Lieu Of Foreclosure

If a loan borrower has had a prior foreclosure or deed in lieu of foreclosure, the loan officer should confirm the recorded date of foreclosure and/or recorded date of the deed in lieu of foreclosure prior to issuing a pre-approval letter.

  • Just because a homeowner has turned in the keys to their lender in a pre-foreclosure or foreclosure does not mean that the waiting period started on that date
  • The waiting period after foreclosure or deed in lieu of foreclosure time clock does not start until the date of the sheriff’s sale or the recorded date of foreclosure or deed in lieu of foreclosure
  • Many loan officers do not check into this
  • Due to this ignorance, the loan can get denied at the last minute

How Long Does Pre-Approval Take To Get Issued?

A loan originator can issue a pre-approval letter as soon as they get at least three items from the applicant:

  • Two years tax returns, two years W-2s, and most recent paycheck stubs
  • Once the loan originator runs credit and reviews mortgage application and reviews these three items, he or she can issue a pre-qualification letter but not a pre-approval
  • Self employed borrowers may take longer than W2 wage earners
  • This is because the loan officer needs to review the business tax returns and take all deductions into consideration to derive the actual income that can be used
  • Borrowers with a prior foreclosure or deed in lieu of foreclosure, the loan officer needs to confirm the actual recorded date of the foreclosure or deed in lieu of foreclosure before issuing a pre-approval letter
  • There are many more documents that is required to process and underwrite a mortgage loan
  • However, with the three initial documents, a solid pre-approval can be issued

About The Author Of How Long Does Pre-Approval Take

Alexander Thomas Carlucci is the author of this blog on How Long Does Pre-Approval Take and a contributing writer for Gustan Cho Associates. Alex Carlucci is a Senior Vice President of Loan Cabin Inc., a national direct lender headquartered in Lombard, Illinois and headed by CEO Massimo Ressa. Over 75% of Alex Carlucci’s borrowers are folks who could not qualify at other lenders due to their overlays. Loan Cabin Inc. does not have any overlays on government and conventional loans. Alex Carlucci has processors and mortgage underwriters in his office where there is no wait time on clearing emergency conditions to get a clear to close and close a home loan on time. All of Alexander Carlucci’s do not just close, but they all close on time. Alex never issues a pre-approval letter if there may be any hiccups during the mortgage process.

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