Presale Lending

When purchasing a home, whether it’s a presale condo or a resale single-family house, you should be pre-approved for a mortgage. The pre-approval lets the seller or builder know that the buyer can afford the amount and complete the transaction. It will strengthen your offer. For many presale purchases, it’s often a requirement that buyers be pre-approved when making an offer.

At the time of signing the purchase & sale contract builders want to know that a buyer has been pre-approved for the amount of the home they’re buying. Otherwise, the builder may tie up a unit for up to two years with a buyer who can’t afford to purchase it. Now, virtually all builders have teamed up with a preferred lender who’ll assist buyers with the mortgage pre-approval process.

One benefit of using a builder’s preferred lenders is that they often provide long-term rate locks, and potentially, a good rate and incentives. With many condo projects taking up to 2+ years to complete, getting a long-term rate lock can be a good thing especially with rates starting to rise. Though, buyers should be diligent when working with the builder’s lender.

Buyers do not need to use the builder’s preferred lender. In fact, they should reseach and consider alternative options. A few companies offer long-term rate locks directly to the buyer, in this area they’re predominantly Wells Fargo and Countrywide. Countrywide, for example, provides a rate-lock for up to 24 months through their Premier Builder Rate Cap Program and does not have a minimum pre-sale requirement to close.

Here’s some of the information the lender will need in order to pre-approve a buyer:

• W-2 forms for the past two years
• Copy of pay stubs for one – two months
• Copy of bank statements
• Copy of tax forms
• Copy of any asset statements, such as 401(k) & stocks
• Documentation of additional income sources such as pension or child support
• Current & past employment information

Difference between pre-qualification and pre-approval:

• Pre-qualification provides a ballpark estimate that a buyer can afford based on income and debt.
• Pre-approval is based upon an in-depth review of a buyer’s finances that includes credit check, income and employment history verification.

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Tags: Condo Pre-sale