Chase Mortgage Loan Pre Approval – Getting a pre-approved letter of credit is similar to getting a college acceptance letter or job offer. It’s great that someone loves you and trusts you enough to welcome you into their community. Getting a pre-approved letter of credit is very satisfying as it takes 2-5 weeks to go through the pre-approval process.
But like college or work, the hard part begins after agreeing to the rules. Once you get pre-approved, you need to find a home, make an offer, get an offer accepted, go through all the contingencies, sign all the paperwork, and be good to go with the mortgage.
Chase Mortgage Loan Pre Approval
After writing about how to get pre-approved, I will share what a pre-approval letter looks like. Then I’ll share what’s next. Getting an advance letter is important in the real estate market.
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After three weeks of submitting endless paperwork to the lender who refinanced my previous mortgage, I finally received an encrypted email from them with the following pre-approved letter of credit.
The pre-approved mortgage amount is $1,700,000 with a target purchase price of $2,800,000. The down payment is $1,100,000, which creates a loan-to-value ratio of 60.71% ($1.1 million / $2.8 million) Loan type 7/1 ARM, my favorite type of mortgage at an incredibly low 2.125%.
There was a time when I only took the 5/1 ARM because the 5/1 ARM offered the lowest interest rate with the most comfortable fixed term.
However, in recent years, the 7/1 ARM has become even more attractive. This is because the yield curve has flattened or inverted. You still get the two-year rate, but you pay a higher mortgage rate than a 5/1 ARM or 30-year fixed mortgage.
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The monthly payment on a $1,700,000 mortgage at 2.125% is $6,390.33. To give you some perspective, when I bought my first single family home in 2005 for $1,525,000, I took out a $1,225,000 5/1 ARM at 4.75%. My monthly mortgage payment was also $6,390. After 15 years, it’s true how I could borrow another $500,000 with the same amount due to lower mortgage rates.
During this 15+ year period, most of us have seen our income and/or net worth increase significantly. Therefore, the combination of high wealth, high home equity and low mortgage interest rates are important factors in the growth of the real estate market in these uncertain times.
Please note that the 2.125% mortgage rate helps price the relationship. I have assets with the lender that qualify me for their highest discount rate. But even if you can’t get 2.125%, you can probably get 2.5%-2.625% with a jumbo 7/1 ARM loan, which is cheaper.
You may be wondering if you should apply for pre-approval based on a certain mortgage amount or if you should apply based on the price of the home you want to buy. You can go either way because ultimately both roads lead to the same destination. In other words, the bank ultimately decides how much you can pre-approve.
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Generally, people search for the homes they want to buy based on their price range. Price range is determined based on income and down payment. From there, the prospective home buyer provides the mortgage officer with the relevant information to continue the process.
In my case, the house appeared on the Internet and I thought it was great. The asking price was $2.9 million, which I thought was a bit high. I wasn’t comfortable paying more than $2.8 million, so I gave my lender $2.8 million as my target sale price.
It was a gamble because there was no guarantee that the seller would sell for less than $100,000 over their asking price. If the seller wouldn’t budge and I really wanted the property, I should have offered a $1.2 million down payment instead of a $1.1 million down payment. But I had to go with the best price for me. This is what you all need to do. If I have lost property, so be it. There is always another great property for sale.
Now that I have a pre-approval letter, I realize that I should have applied for an even higher pre-approved loan amount, especially now that it is getting harder and harder to secure a loan. The reason for this is that it is easier to borrow less than you are pre-approved for rather than more.
What A Preapproval Credit Letter Looks Like For Buying Property
Right now I am limited to buying a property for $1,700,000 (front mortgage amount) + how much I can put down. If I want to use a luxury property that can show more weakness, I can’t because I don’t have enough money.
It takes an additional 2-5 weeks to get through the pre-approval process for new adjustments to get more credit.
As a seller, you should only deal with pre-approved potential buyers unless you are desperate. Otherwise, there is a high probability that the transaction will be delayed or lost due to financial uncertainty.
When I was trying to sell my single-family rental in 2017, the buyer missed a potential financing deadline by two weeks because his lender had issues with his deed transfer. It was a very stressful process because he was my only buyer.
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In times of uncertainty, lenders are tightening their lending standards to protect their businesses. For example, Wells Fargo and Chase have announced that they will only accept home applicants with 20% down and a credit score of 700+. Many potential buyers who only pre-qualify are very disappointed when it comes time to actually take the money.
This loan approval is based on existing mortgage products and terms. Loan approval is not a commitment
To issue a loan, and it must be modified or terminated: the loan no longer meets the requirements of the applicable criteria; and/or material changes resulting from receiving updated information may cause your loan application to no longer meet our underwriting requirements; and/or there are changes to mortgage requirements beyond our control, such as those imposed by investors, government agencies or mortgage insurers.
In other words, despite the pre-approval, the borrower must still be in good standing. The borrower must submit all requested supporting documents.
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While on average it takes 2-5 weeks to collect documents, explain financial transactions, collect more documents and wait, your pre-authorization letter only lasts for a limited time.
On average, you have between 30-45 days to use your advance letter before it expires. After 30-45 days your lender will start asking for the last two months to verify your creditworthiness.
If your income and financial situation have not changed, you should have no problem getting re-approved. It takes time to collect and send the latest documents. Be careful not to do anything drastic with your work or finances for 30-45 days.
Changing jobs, quitting your job, buying a car with a loan, going to Vegas to put all your money in the black, and forgetting to pay your credit card bill are just a few red flags that could jeopardize your pre-approval process.
Soft Pull Preapprovals
When you receive your pre-approval letter, bundle your pre-approval letter with your real estate love letter when making an offer. The extra effort can make a difference, as many buyers don’t.
You may be wondering if you can lower the estimated sales price in your pre-approval letter. Sometimes you can make a lower offer after reaching an agreement. For example, I didn’t want the seller to see the estimated sale price of $2,800,000 in my cover letter if I only offered $2,700,000. Unfortunately, my lender said they cannot change the sales estimate. Price in the letter. It has to go back through underwriting.
As I mentioned at the beginning of this article, the real work begins after you receive your pre-approved letter of credit. Hopefully you will get pre-approved before you find your ideal property.
When it comes to buying a property, please take your time. You only have a limited amount of credit. Enjoy it!
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If you want to refinance your mortgage or buy a new property with a mortgage, check your creditworthiness. Credible is the leading lending marketplace where lenders compete for your business. Get real free quotes in minutes. Mortgage rates are at an all-time low. Take advantage!
Also look at real estate investment opportunities given record low mortgage rates. Fundraise and CrowdStreet are my favorite marketplaces that allow you to invest in real estate around the country.
Focus on private eREITs that provide equity investors with stable and diversified real estate exposure. CrowdStreet focuses on individual commercial real estate transactions in 18-hour cities. Appraisals are cheap and rental income
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