Any number of issues can kill a deal between buyer and seller. Besides the property condition and failed negotiations between the agents, financing plays a big role. Until the borrower gets the “Clear to Close” letter from underwriting you really don’t know if they have the financing.
Most buyers get Pre-Approval or Pre-Qualification letters for their journey of buying a house with their Realtors.
We at Avalon Financial only provide Pre-Approval letters to our borrowers. This is an in-debt analysis of buyer’s ability to obtain the financing including a Fannie Mae underwriting. This is a much more reliable approach compared to Pre-Qualification. We obtain and verify all the necessary information such as borrower’s income, credit and assets. Pre-Qualification is just a preliminary number crunching by a loan officer without any real underwriting.
Every approval comes with limitations and conditions under which the financing may be denied. So, what is a “Clear to Close” letter? This is a letter from underwriting that is issued after all the conditions and hurdles are cleared and met. It is basically a green light to close escrow.
Here are some common examples that will prevent the buyer obtaining the financing even if they are already approved:
- Recent major purchases with financing - Cosigning for a car or student loan for a family or friend - Late payments on credit card or any other obligation - Reduction of income (i.e. loosing a second job or bonus income if used in qualifying) - Large amount of cash deposit in the bank accounts
We regularly inform and remind our borrowers to prevent these events in their buying process. This way we secure a smooth transaction and ability to obtain “Clear to Close” in a timely manner.
Approval Letter is not a full commitment until you have a CLEAR TO CLOSE.