How Do I Pay for this House?
The buyer should have been pre-approved by a lender in order to purchase a property. There is a difference between being pre-qualified and being pre-approved. To be pre-qualified means that according to what you have told the lender, he believes you can purchase the property for whatever sum. Being pre-approved means the lender has checked the assets and liabilities and feels that the buyer can afford to own this property…the buyer is “good to go”. The buyer wants to be pre approved.
But a pre-qualification form should accompany every offer. However all offers using the AAR Contract are contingent upon loan approval, if the buyer suddenly cannot qualify for any reason, he/she is out of the contract, and if the property does not appraise, the loan cannot usually be granted and the buyer is out of the contract. Earnest money will be returned to the buyer.
If the lender has “Prior to Document” conditions on the loan, then the specified conditions must be met prior to documents being issued by the lender. For example, a termite treatment may be required by a lender for a VA loan. Documents cannot be issued and therefore the loan documents will not be issued, nor the loan funded without this condition being met. (A loan cannot fund without the signatures of the buyers.)
If the buyer had been offered an interest rate but failed to lock the rate because he/she thought the rate would go down, this is not sufficient reason for the contract to be cancelled. Failure to have the necessary funds to close escrow is likewise, not a reason for the contract to be cancelled.
The buyer must provide the lender the name of the buyer, social security number, address of the property to be purchased, buyer’s income , estimated value of the property, and the amount of the loan requested. The buyer grants the lender permission to obtain a tri-merged credit report.
The Loan Status Update must be delivered to the seller with appropriate information describing the current status of the loan. The update must be provided by the lender when requested by the seller.
The buyer will sign all loan documents no later than three days prior to the Close of Escrow date.
The financing portion of the contract indicates the type of loan, and if there is a change, all parties and the escrow company must be notified. The buyer pays all loan costs unless otherwise indicated, and if concession from the seller to the buyer are a part of the contract, this must be spelled out. If the loan is a VA loan, certain fees cannot be paid by the veteran and must be paid by the seller. The appraisal fees which are to be paid, is designated either paid by the seller or by the buyer.
These provisions also act as instructions to the lender and the title company and permit the seller to know the details of the loan. Both the buyer’s agent and the seller’s agent will monitor the loan process to make sure all time frames are being met.
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Tags: Buyers, Consumer Education, Financing