When should I get loan approval?
The best time to
begin the loan process is before you begin looking for a home. This
means if you are transferring into the Denver area, you should start
working with a "local lender" prior to your arrival in Denver. Your
loan should be started and at least far enough along so the lender
can give you an "approval letter" or the very least a "pre-qualified
letter".
Obviously an "approval letter" is by far the best. It not only
provides you the borrower with the assurance that you can finance a
home, but more important, it provides you with a very strong
negotiating tool. Sellers are much more motivated to deal with a
buyer who is serious and can prove it. They know that if the terms
of a sale can be agreed upon and once the property appraises and
passes your inspection, the transaction will take place. The
guess-work is eliminated.
What constitutes loan approval?
As the borrower your credit can be approved but truly loan
approval does not occur until the lender has been satisfied with the
value of the home, by having an appraisal done. In some situations
the lender also will require a survey or ILC (improvement location
certificate) to be done to assure the home is within its legal
boundaries. A title commitment is required by the lender to assure
no other leins are currently on the property. Once all these items
are satisfied the lender will "approve the loan."
Why is loan approval important to me?
Colorado contracts have specific deadlines outlined for loan
approval. This is important to a purchaser in that if the deadline
is not met, the buyer is considered "out of contract". This means
the borrowers earnest money can be held by the seller and worst yet,
if the seller doesn't want to sell he doesn't have too.
The sad but true fact, even though the lender is in control of
the loan process, they have no responsibility in the contract. It is
the buyers responsibility to meet the contract dates. Here, once
again I stress the importance of using a good, reputable local
lender.
