Jul 26 2011

Pre-approval and HOAs

Had a reader comment on my last post about getting pre-approved:

What’s your opinion on the preapproval/approval process? I wish you could get officially approved before putting in an offer, it would save so much stress I think. Seems like a very backwards system.

I did get pre-approved. There are two things you can do. You can get pre-qualified, which means you tell a lender your info — aproximate income, the debts you have, the amount of money you want to borrow. They are taking your word on all of this information and aren’t fact-checking anything.

They will tell you if they think you will probably be able to get the loan you are seeking, or probably not. It’s nothing binding, but it’s something you can use when you are in the very early stages of buying a house to help get an idea of what you want to spend and what the bank will lend you.

The pre-approval is much more involved. The lender will have you submit a variety of documents — bank statements, pay stubs, tax records, retirement accounts, etc. They pull your credit. They verify all of the information to see if you really can afford (in their mind) the amount of money you want to borrow.

The bank can then issue a pre-approval letter that you can use to attach to your home offer. Ours had an amount on it, but our realtor used white out to cover the dollar figure up. She said it was just important that the sellers knew we had been approved in general, and that we probably would be able to afford that particular house.

For situations where multiple offers are received at once (like how ours went), the pre-approval letter can give that buyer an edge over another offer without a letter.

So maybe the reader got pre-qualified instead of pre-approved, and that’s why they are running into issues?

Next up, some of you have cautioned me to read the home owners association covenants very closely. I’m working on it.

So far, this neighborhood seems to be pretty reasonable. Some neighborhoods I’ve seen have crazy restrictions and it’s over the top. I think we’ll be ok with these provisions.

I don’t know if there are any newer neighborhoods around here that don’t have a HOA. Even some of the sorta older ones do. Oh well.

We have our inspection scheduled for Saturday. Hope any problems make themselves known…and hopefully there’s nothing majorly wrong with it.

The current owners are relocating for work, and there’s a relocation company involved. Apparently now the relocation company is the new seller. I guess they bought the current owners out? I’m not really sure what their arrangement is, but we’re having to sign a rider from the relocation company and agree to their terms. If the relo company now owns the property, maybe they will have more room to negotiate any types of repairs that could be needed.

The closing date is set for Sept. 2. That’s not too far from now!

2 Responses to “Pre-approval and HOAs”

  1. Thanks for highlighting my question. I actually went through the pre-approval process, not pre-qualification. This may get long…I apologize. I had to have a pre-approval letter from the bank before I could put in an offer on a house. Our realtor made it clear it had to be pre-approval and not pre-qualification. My letter actually listed about 50% of what I had been approved for, the bank guy said that was so they wouldn’t counter with a higher price based on my approval. I went under contract on June 30th.

    The bank I originally dealt with didn’t request any personal information before giving me my pre-approval letter (every piece of paperwork from them states pre-approved, not pre-qualified). Once under contract the guy at the bank became very nasty towards me and refused a meeting. My gut told me not to deal with him, so I switched banks.

    Finally on July 13th I had a meeting with another bank and they actually ran my credit, pulled tax info, requested income verification and debts, etc. Also pre-approved me. The lady couldn’t believe the crap the other bank had done, even charging me $50 for my “pre-approval”.

    It’s now July 26th and I still don’t have a yes or no for my loan and we’re suppose to close August 23rd. It’s been very stressful. Every day I get a call requesting more information. Yesterday they called requesting I write a letter regarding my medical history dating back to 2002. WHAT?! Then I had to write a letter explaining why Equifax pulled my credit on July 13, 2011 – it was their bank that pulled it! They also contacted my mother and requested she write a letter about her disability, which I’m not sure why that has anything to do with my loan? I’m 28, married and haven’t lived at home for many years. Very very strange.

    This is why I asked about the pre-approval process, because my experience seems to be a lot more difficult than others and I didn’t know if it varied by state or what. This is for an FHA 203K loan on a foreclosure property. We were originally going with a conventional loan with 25% down, but the new bank doesn’t offer conventional loans. The bank lady also told me that it’s far more difficult for me to get a loan on my own since I am female. I couldn’t believe that!

    I just wish there was a definite yes or no before you make an offer on a home. But no lender will do that, they only pre-approve/qualify. It just seems like it would save a lot of time and unnecessary stress if you had an official YES to a loan before even house hunting.

  2. HOA are often paper tigers–drive around after you get a copy of the dos/don’ts. Many also suffer from lack of funding–keeping the private street litghts on and plowing snow is expensive. Is it the same 3 old ladies who have been on the HOA board all along? Or the lawyer who is stuck with his first house?? How much per year? What is the delinquency rate? How are dues payments enforced? Do they have any pending law suits?

    This is my pet peeve with suburbia. Done right an HOA is a good thing. Most aren’t done right. Look at who built the development. Are they still in business? Again, check law suits! (If you need to know how to do this, just email me.)

    Pre-approval is much more rigorous today, but the only strike against you is new to the job. You should be just fine.

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Hey! I'm Kacie, wife to Shane and mother to Jonathan (7), Vivienne (5) and Amelia (2) . I write about my family's finance: how we save money, improve our spending, and plan for the future.

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