Mortgage Preapproval?

puma1552 · Feb 19, 2015

First time homebuyer here, about to navigate this process.

Our apartment lease is up at the end of June, and we need to definitively notify the apartment company that we are leaving by the end of April, so we need to at least know everything's a green light to be able to buy a house before then.

We can buy anytime, a couple months of overlap between leasing/owning is not a problem.

We've been holding off on even setting foot in a loan office at my credit union for a preapproval until after mid March, when my annual bonus pays out, which will be somewhat substantial to help bolster our down payment and cash reserves, plus another couple paychecks to put towrads savings. I will also get notification of my new salary at this time, going into effect April 1st. So I've been holding off on the preapproval until I have these things to have a better chance at success in the preapproval process.

But should we be getting the preapproval now from a timeline standpoint, or should we wait the extra month? Do we stand a much worse chance at preapproval without this extra cash? It could potentially increase our cash on hand by close to 50% (looking to do a conventional loan with 5% or even 3% down as I saw conventionals with 3% down are back on the table). My credit is excellent (800ish), wife's is just under 700 due to short credit history being from Japan and only living here 3.5 years. Income is about $100k, but only want to spend maximum $1500 a month on a home, PMI included. Absolute worst case scenario (and rather conservative actually) is with a $1500 payment our debt to income ratio would be 37% with 2 car payments and student loans (2 of which will be done in 2.5 years).

So I don't know, is waiting until mid-March, just three months before our lease ends too long to wait to start the process? We won't be buying a foreclosure or short sale, just a normal purchase. Trying to balance the timeline with the March bonus. We could go month to month after June at our apartment, but really don't want to as that gets very expensive and still requires 60 days notice to vacate. But it is an option.

yg17 · Feb 19, 2015

No reason to do it now. Preapprovals are only good for a limited amount of time, generally 60-90 days depending on your bank, so it sounds like with your timeline, you'd end up having to reapply anyways because I doubt you'd close in 90 days.

My approval was for 90 days and I needed every one of those 90 days - I literally closed on the 90th day. I found the house rather quickly, but inspections and repairs dragged the process out.

sdilley14 · Feb 20, 2015

yg17 said:
No reason to do it now. Preapprovals are only good for a limited amount of time, generally 60-90 days depending on your bank, so it sounds like with your timeline, you'd end up having to reapply anyways because I doubt you'd close in 90 days.

My approval was for 90 days and I needed every one of those 90 days - I literally closed on the 90th day. I found the house rather quickly, but inspections and repairs dragged the process out.

Agreed. I would wait. As long as your credit and debt to income ratio is what you think it is, there's no reason to assume that you wouldn't qualify for the loan/payment you are wanting. Wait, have more cash on hand, have proof of increased salary, and try to stay within that 60-90 day window that your pre-approval is good for. You will have NO problem getting a mortgage with that type of score, income, and DTI ratio.

senseless · Feb 22, 2015

This is a great time of year to buy a winter "leftover", because demand doesn't pick up until spring. Since you have nothing to sell, the timing to purchase might be better right now, rather than waiting for the spring market. Of course, it depends on your local housing market.

puma1552 · Feb 22, 2015

Thanks guys, I think we are just going to wait it out since it's really only three more weeks. Hope the process goes well.

AppleDApp · Feb 22, 2015

Why not wait until some of your debts are paid off and you have a bigger down payment?

sdilley14 · Feb 23, 2015

puma1552 said:
Thanks guys, I think we are just going to wait it out since it's really only three more weeks. Hope the process goes well.

Let us know how it goes!

Let me know if you have any questions about the process (I have about 10 years experience in the mortgage business, working with both banks and credit unions).

puma1552 · Feb 23, 2015

AppleDApp said:
Why not wait until some of your debts are paid off and you have a bigger down payment?

It's just time. I've been a renter for 11 years and I'm completely over it, the wife is really tired of it too. She really wants a dog too, which we can't have where we are at. Not interested in moving again either unless it's a house, as we've moved several times in the last several years and we've tired of that too. Kids are on the horizon, and we want to be in a house for that.

Work is good, interest rates are still pretty low, and whether we make a 3 or 5 or 10% down payment (20% is very unrealistic and that's just the reality), it isn't going to make much difference since we can more than afford the payment comfortably with a small down payment and we won't be moving out of the house anytime soon so it doesn't really matter. We are only looking at about an easily affordable $200 difference between renting and owning, so it's kind of pointless to keep renting when we could own. We're north of 30 years old as well.

senseless · Feb 23, 2015

puma1552 said:
It's just time. I've been a renter for 11 years and I'm completely over it, the wife is really tired of it too. She really wants a dog too, which we can't have where we are at. Not interested in moving again either unless it's a house, as we've moved several times in the last several years and we've tired of that too. Kids are on the horizon, and we want to be in a house for that.

Work is good, interest rates are still pretty low, and whether we make a 3 or 5 or 10% down payment (20% is very unrealistic and that's just the reality), it isn't going to make much difference since we can more than afford the payment comfortably with a small down payment and we won't be moving out of the house anytime soon so it doesn't really matter. We are only looking at about an easily affordable $200 difference between renting and owning, so it's kind of pointless to keep renting when we could own. We're north of 30 years old as well.

Don't forget the property taxes and interest are deductible. That could make it very close to renting.

puma1552 · Feb 23, 2015

senseless said:
Don't forget the property taxes and interest are deductible. That could make it very close to renting.

Exactly...we are getting killed on tax returns even claiming zero with additional withholding since we have a decent income and no deductions other than a lousy small student loan interest deduction.

Muscle Master · Feb 24, 2015

Seems like getting a mortgage is the easy part... You need to worry about the hard part... Which is actually finding a house your willing to spend "30+" years in... Think about what I just said

Based on your budget, it's the lil stuff you want in the house, the lil stuff your wife wants in the house, enough room for kids (they need their space... Especially 2-3 kids), the upgradability in certain areas of the house you might want when you get kinda bored with your house 5-10 years down the road

Gotta consider all of that

tayluftwaffel · Feb 24, 2015

I can understand wanting to get a house. I only rented for three years before I decided to make the house decision. My husband and I actually found a PERFECT home that was REALLY under our price range, and we ended up about saving around $175 a month living in a house, all said and done.

We were tired of the apartment thing, and while there are no children on the horizon yet, the house we found (over 100k lesser than where we were looking) is exactly what we wanted.

Obviously, the pre approval thing wasn't a problem. Our Realtor recommended a broker, and we just coasted with that. We got pre-approved, and placed a bid all within about two weeks of finding the house.

I wish you the best of luck, OP! I hope you find the perfect home! They are out there!

puma1552 · Feb 28, 2015

thanks guys, did have a question about the shopping process

lets say we find a house on zillow listed with real estate company A, get in contact with the realtor, look at the house, and decide against it. Then we have a realtor, and now lets say we find another house on zillow we like, but this is listed with real estate company B. can our realtor from company A show/sell a house listed with company B?

Basically, can any realtor show/sell us any house listed with any company that we want? Is any MLS listing up for grabs for all realtors from all companies to show/sell? I assume that it is possible since I've never heard of people having more than one realtor, but thought I'd see how that works.

Mac'nCheese · Feb 28, 2015

puma1552 said:
Exactly...we are getting killed on tax returns even claiming zero with additional withholding since we have a decent income and no deductions other than a lousy small student loan interest deduction.

Don't want to be a debbie downer here but don't get your hopes up for a HUGE return now. Before we bought and had kids, everyone said Oh, great, your tax return will be huge now. Not always true. Of course, it will be better with more deductions, just don't plan on getting thousands and thousands back. We never did, and yes, we do a double check every few years with a different CPA/firm and we aren't doing anything wrong. Sometimes, the math just doesn't work out as well as you thought.

That being said, enjoy the experience of buying your first house. And make sure to get a really good inspector before you sign on the dotted line!

yg17 · Feb 28, 2015

puma1552 said:
thanks guys, did have a question about the shopping process

lets say we find a house on zillow listed with real estate company A, get in contact with the realtor, look at the house, and decide against it. Then we have a realtor, and now lets say we find another house on zillow we like, but this is listed with real estate company B. can our realtor from company A show/sell a house listed with company B?

Basically, can any realtor show/sell us any house listed with any company that we want? Is any MLS listing up for grabs for all realtors from all companies to show/sell? I assume that it is possible since I've never heard of people having more than one realtor, but thought I'd see how that works.

Well, the realtor from that first house on Zillow is the sellers agent. They wouldn't be working with you if you're not buying that house. You want a buyer's agent. They'll work with you to set up showings, advise you on making an offer and the closing process. Ask around if you know any good buyers agents in your area. In my case, I got a recommendation from the loan officer at my credit union, and she was invaluable throughout the entire process, especially since I was a clueless first time buyer. And best of all, a buyers agent costs you nothing, they split the commission with the seller's agent.

Not once did I ever have contact with the seller or their agent. My agent handled everything. And yes, buyers agents and sellers agents will work with each other regardless of their company.

velocityg4 · Feb 28, 2015

puma1552 said:
thanks guys, did have a question about the shopping process

lets say we find a house on zillow listed with real estate company A, get in contact with the realtor, look at the house, and decide against it. Then we have a realtor, and now lets say we find another house on zillow we like, but this is listed with real estate company B. can our realtor from company A show/sell a house listed with company B?

Basically, can any realtor show/sell us any house listed with any company that we want? Is any MLS listing up for grabs for all realtors from all companies to show/sell? I assume that it is possible since I've never heard of people having more than one realtor, but thought I'd see how that works.

Couldn't say for your area but if the market is anything like were I'm at. If you rely on Zillow to buy houses in the price range you want. Then you will never get one. By the time it shows up on Zillow, if the price is good, it will already have a pile of bids and an accepted offer several thousand over the asking price. In that price range you are competing with professional buyers finding houses for investors that pay cash.

You need to get a buying agent that will set you up with Listing Book. As Listing Book will give you listings when they come out. Zillow takes a couple of days. Listing Book is only available to real estate professionals. Thus why you need an agent.

You make your offers through your agent. You don't contact the seller's agent directly. As they will think you are not represented and can lead to problems later on. Some areas don't allow dual agency anyways.

Every day I had to go through the new listings on Listing Book which came to my e-mail. Print out a list of potential houses, use Zillow to check comps by looking at recent sales in the area of similar size and age to make sure the price was good. If it looks good I'd have to make an offer before seeing it, just go by pictures. Then if the offer was accepted go and view the interior of the house. If I didn't like it then cancel the offer. This is standard procedure here as you get 15 days no questions asked to cancel an accepted offer without losing your deposit.

Also on weekends I'd gather up the pending offers and any new listings that look good. Then spend half a day driving by them, peeking in the windows of vacant foreclosures, and driving by the comps to see if the houses and neighborhoods are truly comparable. This way you can withdraw offers before they are even accepted. The most important things I look at are the condition of the siding, roof and foundation. They can be very big ticket items if in bad shape.

The pre-qualification letter needs to be updated every 30 days.

Not all houses are under such pressure. Those listed under HUD, Fannie Mae and Freddie Mac have an extended listing period. Most only allow offers for the first 15 to 30 days from people whom will live there. So investors will stay away. Just be careful with them. It isn't too uncommon that they are listed way over market value. Also you can't rent them out later on unless you refinance with another lender. I forget how many years need to pass before you can resell or refinance.

tayluftwaffel · Mar 3, 2015

puma1552 said:
thanks guys, did have a question about the shopping process

lets say we find a house on zillow listed with real estate company A, get in contact with the realtor, look at the house, and decide against it. Then we have a realtor, and now lets say we find another house on zillow we like, but this is listed with real estate company B. can our realtor from company A show/sell a house listed with company B?

Basically, can any realtor show/sell us any house listed with any company that we want? Is any MLS listing up for grabs for all realtors from all companies to show/sell? I assume that it is possible since I've never heard of people having more than one realtor, but thought I'd see how that works.

Dont get the listing agent to show you a house that they listed. Hire your own agent, and yes, they can show you any house in your state.

puma1552 · Mar 3, 2015

Lots of good info here, much appreciated.

Now let's say my credit union doesn't give us the best rate that's out there (today the rate is 3.875 and the APR is 4.018 for a 30 year conventional, fixed, not sure how this stacks up against other lenders but in reality it's probably pretty good). Then what? We don't belong to any other banks, so at that point cross-shopping lenders is really just a shot in the dark, what do people do, just go onto somewhere like lending tree and send applications out into the abyss on a whim?

yg17 · Mar 3, 2015

puma1552 said:
Lots of good info here, much appreciated.

Now let's say my credit union doesn't give us the best rate that's out there (today the rate is 3.875 and the APR is 4.018 for a 30 year conventional, fixed, not sure how this stacks up against other lenders but in reality it's probably pretty good). Then what? We don't belong to any other banks, so at that point cross-shopping lenders is really just a shot in the dark, what do people do, just go onto somewhere like lending tree and send applications out into the abyss on a whim?

You can finance at banks you don't have accounts with, so you can go talk to other banks and credit unions in your area. If your credit is good, they'll be happy to take your money.

prostuff1 · Mar 3, 2015

puma1552 said:
Lots of good info here, much appreciated.

Now let's say my credit union doesn't give us the best rate that's out there (today the rate is 3.875 and the APR is 4.018 for a 30 year conventional, fixed, not sure how this stacks up against other lenders but in reality it's probably pretty good). Then what? We don't belong to any other banks, so at that point cross-shopping lenders is really just a shot in the dark, what do people do, just go onto somewhere like lending tree and send applications out into the abyss on a whim?

Shop around, you don't need an account at most banks to get the loan.

I went to 4-5 different places.

sdilley14 · Mar 3, 2015

Rates are going to be almost the same at pretty much any lender, nation wide. However, closing costs might vary from lender to lender. In all reality, the great majority of mortgages are going to be purchased by Fannie Mae, which means they're subject to the same qualification guidelines and same pricing, nation wide.

FWIW, I'm in the middle of doing a refinance right now, I have "A" credit, and 3.875% is the rate I was quoted this morning. Not sure where you're located, but I'm working with a credit union in WI. That should illustrate how similar rates are.

It wouldn't necessarily hurt to shop around - but you're also subjecting yourself to more sales people and more information (possibly more headache and confusion).

puma1552 · Mar 7, 2015

what exactly is the difference between the rate and the apr? never for any other loan have i ever seen two interest rates, and not sure which one people are referring to when they talk about mortgage rates.

called my credit union and left a message but never heard back...

Macky-Mac · Mar 7, 2015

puma1552 said:
what exactly is the difference between the rate and the apr? never for any other loan have i ever seen two interest rates, and not sure which one people are referring to when they talk about mortgage rates.

called my credit union and left a message but never heard back...

link

The interest rate is the cost you will pay each year to borrow the money, expressed as a percentage rate. It does not reflect fees or any other charges you may have to pay for the loan.

An annual percentage rate (APR) is a broader measure of the cost to you of borrowing money. The APR reflects not only the interest rate but also the points, mortgage broker fees, and other charges that you have to pay to get the loan. For that reason, your APR is usually higher than your interest rate.

dukebound85 · Mar 7, 2015

puma1552 said:
Lots of good info here, much appreciated.

Now let's say my credit union doesn't give us the best rate that's out there (today the rate is 3.875 and the APR is 4.018 for a 30 year conventional, fixed, not sure how this stacks up against other lenders but in reality it's probably pretty good). Then what? We don't belong to any other banks, so at that point cross-shopping lenders is really just a shot in the dark, what do people do, just go onto somewhere like lending tree and send applications out into the abyss on a whim?

don't forget about any "points" either. The rate out there is not necessarily the rate you will get

puma1552 · Mar 17, 2015

So, just an update - my wife and I are officially preapproved, letter in hand. We just gave them a high number that we would spend and they approved that no problem; we weren't interested in just seeing what the max approval would be since we knew we'd never spend more than X.

The interest rate is based on my wife's credit since hers is lower than mine since she's from Japan and only has three years of credit history here in the US, but we were still able to get the second lowest rate they offer which is pretty good, and only a quarter point off from the lowest rate, which I qualified for (I wouldn't have qualified for the amount we wanted on my own income, I was just short on DTI but I'd rather have her on the mortgage anyway of course). But in actuality she's only 20 points short of the top tier cutoff, so she may be able to get it there before we actually take the loan and still get the lowest possible rate. All in all, can't complain at all.

Now, my wife has a realtor recommendation from a client of hers - are there any specific questions we should be asking of him in terms of fees, etc.? I know he gets his commission from the seller, but curious what other fees he might be throwing in at closing (though we are still going to make an offer based on the seller paying closing costs) or anything we should be aware of with the real estate agent?

Mortgage Preapproval?

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