There it is in black and white. Section 29 of the California Association of Realtors’ residential purchase agreement. “Time is of the essence.” And in real estate transactions, which are inherently complex, this simply means that every day matters. To be competitive as a buyer you need time on your side because very likely the seller of the home in which you’re interested knows that the longer things take to get to the closing table, the greater likelihood something might go wrong with the financing you need in order to acquire the home.
“Like what?,” you ask.
Perhaps the borrower/buyer will file his tax return and it will change the qualifying income. Or gosh, maybe the buyers will inadvertently miss a credit card payment, or their autopay will malfunction and they’ll learn that they’re late on a revolving debt. Or as we’ve recently seen, the darn government could shut down. You get the picture. Things happen. And more things can happen if you give them more time.
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What can a buyer do about this short of a mad and stressful rush in their loan process? There are two key actions that prove to be universally helpful across all buyers, all price points and all markets:
1) Get your loan underwritten in advance. Every serious real estate agent will require that you have a valid pre-approval before you begin looking at homes. But what if you could not only get a pre-approval but also have the certainty that your loan application has been through a complete underwrite? That way, all you’d need to complete and provide to your lender once having your offer accepted is a fully-ratified purchase contract and a satisfactory appraisal. Wouldn’t it be great, in advance and free of time constraints of the contract, to not only gain the confidence of a rock-solid approval but also eliminate the time it typically takes to underwrite a file once your offer is accepted? In fact, we do this all the time. An “advance underwrite,” a “pre-underwrite” or a “TBD underwrite” is an extension of our pre-approval process for those who have the time and inclination. Once we have the underwrite complete, it is sometimes possible for the buyer to offer with an exceptionally fast close of escrow (again, without requiring a rush) and even offer without a financing contingency.
2) Get organized! All borrowers owe it to themselves to take the homebuying process seriously. After all, there is a lot at stake. Simply, get your financial house in order before searching for a house to buy. Get all of your income, asset and credit documentation in one place. We’ll typically require two years of tax returns and W-2 forms, 30 days’ worth of paystubs and often a year-end paystub for the last two years. For bank statements, we’ll want two months — all pages even if blank. Other items we request? Driver’s license and/or valid US identification. Also, letters of explanation for any unique characteristics of your application. Remember, I may know your story because we’ll talk about it together, but an underwriter will not have the benefit of those conversations. The more you’re able to concisely convey any specifics of your credit profile, the better you’ll help your cause.
Every year, some home buyers will fall out of contract both because they cannot take the pressure or they cannot meet the deadlines that were spelled out when they got their offers accepted. Time is of the essence. And there are two really good ways, above, that help you adhere to, and succeed in, that reality.
Time stand still,
Robert J. Spinosa
Vice President of Mortgage Lending
Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709
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