loading...

New Lender Program Makes Borrowers’ Offers More Competitive with Cash

by Lark Turner

image

Cash offers are often hard for many home buyers to compete with.

With a no-contingency offer (which many cash offers are), the home seller doesn’t need to worry that the transaction will fall through because of a contingency clause. There’s no uncertainty about whether a buyer may not secure final approval for a loan, or that the house will come in at an appraised value below the sales price. As a response to the prevalence of cash offers in many real estate markets, mortgage lenders are making an effort to allow borrowers to be more competitive through a process known as pre-underwriting, The New York Times reports. The article specifically cited the D.C. area — along with New York suburbs, the Boston area and northern and southern California — as a market where pre-underwriting is becoming more and more attractive.

Pre-underwriting is basically a more rigorous loan process, occurring prior to having an offer accepted, which guarantees a potential buyer will pay what they say they can pay. It eliminates the uncertainty present in run-of-the-mill offers, which are generally contingent on a buyer getting full approval of a loan. With pre-underwriting, applicants undergo a thorough process that involves all the paperwork they’d generally produce in the normal loan process. Once they’re approved, buyers can submit no-contingency offers knowing they’re in the clear for financing, just like a cash offer.

“At the end of the day, when you go to close, the seller doesn’t care where you get the money from as long as you have it,” said Peter Grabel, a loan originator at Luxury Mortgage Corporation, in an interview with UrbanTurf. “A lot of cash offers don’t really end up closing with cash.”

Instead, he explained, they are no-contingency offers made by buyers who know they can write a check in a pinch or are highly confident they’ll be approved for a loan. By contrast, a pre-approval letter “doesn’t really give a buyer confidence to go ahead,” Grabel said, because such letters are frequently secured without a close look at the buyer’s actual financial situation. Income, especially for more financially-complex buyers, doesn’t tell the whole story about what a buyer can afford to pay. Financed offers also generally come with certain contingencies. For example, in most lending scenarios, securing a mortgage is dependent on a home inspection and appraisal, because if a house ends up selling for more than its appraised value, a bank will only underwrite the loan up to the appraised amount.

For that reason, it’s a good idea to get an appraisal done prior to undergoing the loan process, in case the value comes in low, Grabel said, because pre-underwritten home loans are probably still contingent on an appraisal. For buyers able to afford putting a greater percentage of cash down on a home, it may not be a big deal for a house to come in higher than its appraised value. For buyers looking to put down the usual 20 percent, getting an appraisal done before signing a contract should be a priority.

Buyers interested in finding a bank to do pre-underwriting should look toward smaller lending shops, Grabel said.

“Big, national banks are not doing this because it’s a real different investment of time,” he explained. “I just did one today where I got the commitment but the borrower said, ‘Well, bad news. We’re not going forward with this one.’ That’s OK. The next house should be at a similar price point, and I’m hoping he sticks with us.”

This article originally published at http://dc.urbanturf.com/articles/blog/new_lender_program_puts_borrowers_on_level_with_cash/8268

1 Comment

  1. NavyYard said at 12:09 pm on Friday March 28, 2014:

    Thanks for the info! Do you have a list of loan originators in the DC area that you could recommend? Peter Grabel/Luxury Mortgage don’t have a license for the DC/MD/VA area.

Join the discussion

UrbanTurf now requires registration in order to post comments. Register here, or login below if you are already registered.

Click here if you forgot your password.



DC Real Estate Guides

Short guides to navigating the DC-area real estate market

We've collected all our helpful guides for buying, selling and renting in and around Washington, DC in one place. Visit guides.urbanturf.com or start browsing below!

Northern Virginia

Profiles of 14 neighborhoods across Northern Virginia

Ballston
Looking to Give People A Reason to Stay Past 6pm
Clarendon
Happily Straddling the Line Between City and Suburb
Columbia Pike
Arlington’s Neglected Stepchild is Getting a Makeover
Crystal City
Turning Lemons into Lemonade
Lyon Village
Developing An Air of Exclusivity?
Rosslyn
Hitting Its Growth Spurt
Shirlington
An Urban Village Hitting Its Stride
Del Ray
Virginia’s Small Town Near the Big City
Eisenhower Avenue
The Vibrancy Might Take a Few Years
Huntington
The Quiet Neighborhood By the Beltway
Old Town
Mayberry By The Potomac
Parkfairfax
132 Commerical-Free Acres
Downtown Falls Church
Staying the Same in the Midst of Change
Tysons Corner
Radical Change Could Be On The Way

See more Northern Virginia »

Maryland

Profiles of 14 neighborhoods in suburban Maryland

Annapolis
Small-Town Living in the State Capital
Bethesda
Bedroom Community Gets Buzzing Cache
Cabin John
In With The New While Maintaining the Old
Chevy Chase
Affluence, Green Lawns and Pricey Homes
Downtown Silver Spring
Experiencing a Resurgence After a Bumpy History
Potomac
A Suburb on Steroids
Rockville Town Square
Despite the Dynamism, Still Somewhat Generic
Takoma Park
More Than a Little Bit Quirky
Wheaton
A Foodie Magnet on the Verge of Change
Capitol Heights
Kudzu, Front Porches and Crime
Hyattsville
Glass Half Full or Half Empty?
Mount Rainier
Artists, Affordable Homes and A Silo Full of Corn
National Harbor
A Development Rises Next to the Potomac
Riverdale Park
A Town Looking For Its Identity

See more Maryland »

Northwest DC

30+ neighborhood profiles for the city's biggest quadrant

16th Street Heights
DC's Sleeper Neighborhood
Bloomingdale
Where (Almost) Everyone Knows Your Name
AU Park
One of DC’s Last Frontiers Before the Suburbs
Brightwood
DC’s Northern Neighborhood on the Cusp
Burleith
DC’s 535 House Neighborhood
Cathedral Heights
Do You Know Where That Is?
Chevy Chase DC
Not to Be Confused With the Other Chevy Chase
Cleveland Park
Coming Back After A Rough Year
Columbia Heights
DC’s Most Diverse Neighborhood, But For How Long?
Crestwood
An Island of Serenity East of the Park
Dupont Circle
The Best of DC (For a Price)
Foggy Bottom & West End
Where the Institutional Meets the International
Forest Hills
Ambassadors and Adventurous Architecture
Fort Totten
Five Years Could Make a Big Difference
Foxhall Village
350 Homes Just West of Georgetown
Friendship Heights
A Shopping Mecca With a Few Places to Live
Georgetown
History, Hoyas and H&M
Glover Park
One of DC’s Preppier and More Family-Friendly Neighborhoods
Kalorama
A Posh View From Embassy Row
LeDroit Park
A Quiet Enclave in the Middle of the City
Logan Circle
Trendy Now, But Not By Accident
Mount Pleasant
Sought-After Homes Surround Main Street in Transition
Mount Vernon Triangle
From Seedy to Sought-After
Palisades
The Long, Skinny Neighborhood at the City’s Northwest Edge
Park View
It’s Not Petworth
Penn Quarter/Chinatown
DC’s Go-Go-Go Neighborhood
Petworth
Getting a Vibrancy of Its Own
Shaw
The Duke’s Former Stomping Ground
Shepherd Park
DC’s Garden of Diversity
Spring Valley
A Suburb With a DC Zip Code
Takoma
Not To Be Confused With Takoma Park
Tenleytown
Not Quite Like Its Neighbors
U Street Corridor
The Difference a Decade Makes
Woodley Park
Deceptively Residential
Adams Morgan
No Longer DC’s Hippest Neighborhood, But Still Loved by Residents

See more Northwest DC »

Southwest DC

The little quadrant that could

Southwest Waterfront
A Neighborhood Where A Change Is Gonna Come

See more Southwest DC »

Northeast DC

Profiles of 10 neighborhoods in NE

Brookland
New Development Could Shake Up Pastoral Peace
Deanwood
A Little Bit of Country Just Inside the District’s Borders
Eckington
Not to Be Confused With Bloomingdale
H Street
A Place To Party, and To Settle Down
Langdon
The Northeast Neighborhood That Few Know About
Michigan Park
A Newsletter-On-Your-Doorstep Community
NoMa
Evolving from a Brand to a Neighborhood
Rosedale
Ripe for Investment Right About Now
Trinidad
The Difference 5 Years Makes
Woodridge
Big Houses, A Dusty Commercial Strip and Potential

See more Northeast DC »

Southeast DC

6 neighborhoods from Capitol Hill to East of the River

Capitol Riverfront
Still Growing
Hill East
Capitol Hill’s Lesser Known Neighbor
Congress Heights
Gradually Rising
Hillcrest
Notable for Its Neighborliness
Historic Anacostia
Future Promise Breeds Cautious Optimism
Eastern Market
A More European Way of Living

See more Southeast DC »

Upcoming Seminars ▾