This is usually the first thing a buyer (and their agent) wants to know.

The answer is mainly a function of how much income can be documented (and used) and the amount of current and expected debt the buyer will have after escrow closes. The loan program chosen also comes in to play as guidelines on maximum debt-to-income (DTI) can vary.

The type of property will also affect the amount a buyer can qualify for as Condos and PUDs will nearly always have Home-owner Association (HOA) fess and this monthly expense will count towards debt qualifying ratios. 

Some properties may have ‘special’ taxes (such as Mello-Roos) which also have to be factored in. A good mortgage professional will be able to take all this into account and give buyers an idea as to sort of property prices they should be looking for. 

After providing a basic on-line (of over the phone) application, the next step will be to pull a current credit report in order to obtain the all-important credit scores and the amount of debt being reported.  This will also tell us if there any issues such as unexpected or falsely reported matters which may need to be addressed before full loan approval.

At this stage, generally we are able to complete the analysis and issue initial loan approval subject to verification of the data being used for income, assets etc.

The nature of the income being used and the initial approval received will dictate the paperwork which needs to be provided.

For regular employment, W2’s and recent paystubs are usually sufficient.  For self-employed income, Partnerships (K!) or if rental properties are owned most likely 2 years Federal Tax returns will be required.

 Assets being used for down-payment, closing costs and reserves (if needed) will need to be documented by at least two months of statements from bank accounts, retirement funds, investment accounts, or whatever account may be used.

It is hard to imagine a seller, particularly if there is a lot of interest in their property, accepting an offer which does NOT have a bona fide pre-qualified letter attached to it.  Unless of course it is an ‘All Cash’ offer!

A seller will want some assure that the buyer they are going into escrow with has already had their credit, income and assets verified.  Our pre-qualification letters also include a copy of the approval obtained directly from either Fannie Mae (FNMA) or Freddie Mac (FHLMC) and a verification of credit scores (with Buyer’s permission).

Close of escrow (the moment the property official changes hands) depends on the time agreed to in the purchase contract with 30 or 45 days being the most common time frame.

With regards to the loan, the standard CAR (California Association of Realtors) Residential Purchase Agreement (RPA) used by most Realtors comes with a default of 17 days before the loan contingency has to be removed but I have seen this reduced to just 10 days or less! 

This is why it is critically important to have a loan pre-qualified and as fully documented as possible prior to submission and acceptance of the offer (‘acceptance’ is when the clock begins).

Obtaining the funds from the lender is probably the most critical item in a house purchase so the ideal situation is to have the loan fully signed off and loan docs ready to be sent to escrow whilst the various inspections, reports and repairs (if any) are being completed.

It is worth noting that should every fall into place such that escrow can close early this is perfectly acceptable provided all parties agree to it.

This all depends on the reason for the delays and the reaction of the sellers.  A seller cannot just cancel escrow and keep any good faith money deposited by the buyer just because escrow has not closed on time.  Notices have to be given and procedures followed.

My experience is that if it is loan issues which have caused a delay then most sellers will be accommodating provided they understand what the issue is and are given the correct assurances that the loan will close and the delay will not be too long.  Communication is the key!

In a perfect World (for a buyer), the loan contingency will be removed at the moment the lender is about to wire the funds to escrow in order to close but the reality is that the contingency can be safely removed once loan approval has been received from the lender and the major items (such as appraisal etc.) have been submitted and signed off.

It is worth noting that there are actually two stages to a ‘loan approval’ from a lender.  

The first one is after the entire loan file has been reviewed and approval given subject to certain conditions being met.  The number of conditions will depend on how complete the documentation was to begin with and in the complexity of the file (are there many rental properties, or several partnerships and self-employed business etc.).

At this stage of the approval, I can mostly tell that the loan will be able to close, or if there are any issues which may be problematic and need to be addressed ASAP.

The second stage is Final Approval and CTC (Clear-to-Close) means that all conditions have been met, the underwriter has signed off the file and it is now being sent to the closing department to prepare final loan docs etc.

At this stage the lender and escrow will be directly in touch to co-ordinate the signing and closing.