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I'm in the process of refreshing the loan pre-qualification letter that I got last year at this time. Was very unsatisfied with the first broker so am switching to another.
I'm unclear on how, exactly, these things influence sellers. I have a substantial amount of cash saved, but my income was down about $30K last year. According to the new broker I'm working with, even if I have co-signers backing the loan, the only thing that's really relevant is the income I reported for last year.
So how does this play with a seller? What's a preferable situation - to have a buyer who qualifies for a 600K loan, or one who qualifies for a $300K loan and can show another $300K in the bank?
Sellers don't care about your financial picture, they only care about the offer you're making them.
Now co-op boards are a completely different matter ...
I assume you're saying sellers don't care about your financial picture assuming that you can quickly demonstrate that the offer is legitimate. But I'm asking if it's any better to pre-qualify for a high amount or is it just as good if you can demonstrate other means (cash) of closing the deal. How important is the letter from the bank?
if you are buying a coop, it will not matter if you are prequalified or not, you will be roto-rootered as if you were dealing with 2 banks, regardless.
if you are dealing with a condo, I dont think anyone cares whether or not you can get a mortgage and for how much, there is usually no mortgage contingency clause, so you have to be a big boy/girl and rely on your confidence that you can get a mortgage, or pay cash if you cannot.
they really arent independent of each other. The entire package will come into question one way or the other. A high mortgage wont matter if you cant pass the financial test.
First,Why was your income down $30K last year. For instance was it a reduced bonus? What is your present income year to date?
As far as what the seller would prefer, the seller just wants to know he has a deal that won't fall through. However a seller doesn't know which scenario will get you approved for a loan.
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My present income year to date isn't relevant because I work as an independent contractor for a company owned by my own family and am paid year-end in a single sum as a bonus. This is done for tax purposes.
If a seller wants to know that a deal won't fall though then I would assume that presenting sufficient resources to cover the sale price is all that's necessary, and that it isn't entirely dependent upon the amount one qualifies to borrow from a bank. As far as the bank is concerned, though, cash on hand is largely irrelevant compared to annual reported income.
the seller wont care, as long as you put 10% down and have a no contingency clause. Their broker, assuming they have one, will check out your numbers vs. what they think a coop board will pass. Either way, it has nothing to do with your pre-qualification letter, which is less useful in this case than toilet paper.
if you're getting a jumbo loan, cash on hand is very important. You must show reserves, even for a high balance fannie loan. Of course your debt to income ratio is very important, but so are reserves.
And so you may satisfy the seller's concerns, but hey interest rates are lower now than in sixty years, and getting a low at these rates is a very good thing.
sorry, low = loan
Yes, it probably makes sense to borrow as much as you can afford to borrow. I'm somewhat perplexed by how much of this is determined exclusively by recent income returns, and not having a sturdy co-signer or cash in the bank with excellent credit.
If you need a mortgage, then I would consider it extremely poor advice to consider giving up your mortgage contingency.
flarf, last I heard, a seller would never accept one in manhattan
I'm confused as to what exactly a mortgage contingency is. If it means that you can back out of a sale if you can't get a mortgage, doesn't that put the burden of proof on the seller to prove that you could, in fact, get one? Doesn't it just provide an easy out for a buyer?
Sellers accept mortgage contingencies all the time in Manhattan, assuming they see you as likely to actually get a mortgage.
Here's the Cliff's Notes version of the boilerplate mortgage contingency: Purchaser shall diligently and in good faith apply to an institutional lender for a loan, submit any documents requested, and pay any fees required within 5 days of the fully executed contract. If the loan application is denied in writing, then the purchaser gets the deposit back.
gcondo, it's not 2006, almost all deals have a mortgage contingency unless they are cash deals, and then they still sometimes do. i just did a cash deal with not a mortgage contingency, but an allocation of time for me to get a mortgage.
I had my contract worded so that if anything happened to me (ie job loss) and I was unable to close I got my deposit back. Thats what you can get in a buyers market. that was also fall 2010.
I would not buy an apartment without a mortgage contingency. Even in 2006 I didn't do it.
Even today pre-qual means almost nothing from an underwriting perspective ie chance of actually getting loan. Read the fine print if you care to. It just shows the seller you've done a little footwork.
Brokers will tell you that you need to drop your mortgage contingency to be competitive. DO NOT LISTEN. You will likely lose if there is a comparable (or slightly cheaper) cash bid out there, but you probably would have lost to that bid anyway. With how unpredictable lenders are, I'd say mortgage contingency should be non-negotiable.