GreyGhost pretty much covered it, a preapproval means you met all the criteria on the day you were "preapproved" . It's really only a guideline and not an actual guarantee the lender will transfer the money on the day required.
Last day before the deal closes they will check everything you said, run a credit report and reasess. Its to make sure you didnt go buy a car/trailer or get another 25K credit card, because now you may not qualify.
yes idiots while buying a house will think, wow, I'm preapproved for a million, but I'm only spending $800 so I can lease that range rover for $1000 a month! I'm gold!! no, no your not.
From personal experience, the pre-approved level has also been shockingly above what I consider reasonable. I could see this gap dropping quickly in the current environment until things reach a new normal and banks regain confidence. The two houses we have purchased, we bought under our pre-approval by a mile (first house was pre-approval minus 500K, second house was pre-approval minus 300K because I don't want to move again until I am ready to die). We setup pre-approval based on one real income plus one minimum wage in case things really hit the fan. I can only imagine the crazy numbers people were approved for (and bought) if family gross income was used.
GreyGhost pretty much covered it, a preapproval means you met all the criteria on the day you were "preapproved" . It's really only a guideline and not an actual guarantee the lender will transfer the money on the day required.
It's also a ******** game that some banks play. I've had multiple pre-approvals from BMO for mortgages on previous properties, and then 2 days before closing they're like 'Oh oops...we meant you need to give us 15%-20% down payment, not 10% like originally quoted.'
I've seen the bank do this multiple times, they give you a pre-approval so you don't shop around, and then right before closing you don't have time to shop around so they can do whatever they want. I walked away from BMO mortgages after all that.
EDIT: Actually the 'straw that broke the camel's back' for me was when I was shopping for our second last place...broker offered Prime -1% so we're all good to sign the mortgage but BMO comes back and says they'll match. OK great. Sign the pre-approval, all's set and good to go. Literally 48h before closing I go to the bank and they change it to 'Prime - 0.85%' instead due to 'a .15% BMO thing'. I lost it. But couldn't shop around.
*surprised pikachu face* on the mortgage rep when I told them we're leaving BMO on our current mortgage. When they asked why I explained all the times I've lost deals because they kept dicking us around.
Pre-approval assumes rate, income, downpayment percentage and property value all remain unchanged (or at the very least meet minimum criteria). In the current situation, probably all four of those are changed for many families. If you have a big downpayment (say 30%+), I would hope the lenders could overlook a temporary covid-related income blip. The lender is protected by the equity. From stories I have heard, that is not happening right now.
One doesn't have to look hard to find that just about every bank on the planet has screwed a client one time or another. Sometimes it's head office and sometimes it's the branch manager playing God.
Businesses used to use irrevocable letters of credit. The bank has to honour the invoice. Any way that could guarantee a home buyer the deal goes through.
This goes from the frying pan to the fire fast. Deal fails to go through and the ensuing chain reaction. People financially stressed have to add legal bills to the mess.
My favourite short story about a manager wanna be:
All the power is with the lender. Does not matter what you have in writing from them they can pull the deal at the very last second like others have noted. All in the fine print...
I have never had it happen but reading the fine print added a lot of stress to my life....
From personal experience, the pre-approved level has also been shockingly above what I consider reasonable. I could see this gap dropping quickly in the current environment until things reach a new normal and banks regain confidence. The two houses we have purchased, we bought under our pre-approval by a mile (first house was pre-approval minus 500K, second house was pre-approval minus 300K because I don't want to move again until I am ready to die). We setup pre-approval based on one real income plus one minimum wage in case things really hit the fan. I can only imagine the crazy numbers people were approved for (and bought) if family gross income was used.
It's common for banks to approve beyond the value of the house and there are a lot of good reasons for the bank and the consumer. That doesn't mean the bank will advance beyond their established ratios at any given time. By registering a larger collateral value at a future time the bank can easily extend additional credit under the existing collateral registration in a mortgage or home equity line of credit without having to discharge and re-register the collateral.
Historically real property has had substantial gains in value over the term (25 years) of a mortgage and many clients stick with their original lenders for a very long time. Doing it this way saves a ton of costs and paperwork for the lender and the borrower, it also has another advantage for those who add life and critical illness insurance as those rates are pegged at mortgage origination -- not at the time the funds or additional funds are advanced.
It's also a ******** game that some banks play. I've had multiple pre-approvals from BMO for mortgages on previous properties, and then 2 days before closing they're like 'Oh oops...we meant you need to give us 15%-20% down payment, not 10% like originally quoted.'
I've seen the bank do this multiple times, they give you a pre-approval so you don't shop around, and then right before closing you don't have time to shop around so they can do whatever they want. I walked away from BMO mortgages after all that.
EDIT: Actually the 'straw that broke the camel's back' for me was when I was shopping for our second last place...broker offered Prime -1% so we're all good to sign the mortgage but BMO comes back and says they'll match. OK great. Sign the pre-approval, all's set and good to go. Literally 48h before closing I go to the bank and they change it to 'Prime - 0.85%' instead due to 'a .15% BMO thing'. I lost it. But couldn't shop around.
*surprised pikachu face* on the mortgage rep when I told them we're leaving BMO on our current mortgage. When they asked why I explained all the times I've lost deals because they kept dicking us around.
Most buyers don't understand much about the way mortgages work, there are a lot of terms and tricky selling tactics used by the people selling mortgages, it's an extremely competitive business. Individual brokers or direct lending reps earn commission - most are 100% commission so they eat what they kill. On a $750K mortgage that commission is between $3,750 and $8,250 depending on the terms of the deal -- as you can see there are a lot of REA$ON$ they may not put your needs ahead of their own.
If you don't really understand how mortgages work when buying a home, get advice/help from the lawyer who will be closing the deal for you. It might be the best $150 you spend on your home.
Most buyers don't understand much about the way mortgages work, there are a lot of terms and tricky selling tactics used by the people selling mortgages, it's an extremely competitive business. Individual brokers or direct lending reps earn commission - most are 100% commission so they eat what they kill. On a $750K mortgage that commission is between $3,750 and $8,250 depending on the terms of the deal -- as you can see there are a lot of REA$ON$ they may not put your needs ahead of their own.
If you don't really understand how mortgages work when buying a home, get advice/help from the lawyer who will be closing the deal for you. It might be the best $150 you spend on your home.
On the current house the mortgage broker pushed hard for a mortgage larger than we needed. I gave up on arguing, pulled the larger mortgage and paid off 10% the first payment. He got a bigger commission, it didnt cost me much and it makes larger pre-payments possible if it seems like a good idea in the future.
On the current house the mortgage broker pushed hard for a mortgage larger than we needed. I gave up on arguing, pulled the larger mortgage and paid off 10% the first payment. He got a bigger commission, it didnt cost me much and it makes larger pre-payments possible if it seems like a good idea in the future.
He probably didn't get a bigger commission -- lenders are wise to that move, many will claw back commissions on prepayments made in the first 6 mos to discourage brokers from doing this.
He probably didn't get a bigger commission -- lenders are wise to that move, many will claw back commissions on prepayments made in the first 6 mos to discourage brokers from doing this.
As of yesterday, the number of cases according to tam were going down, but deaths are still going up because somehow all the old folks homes/retirement communities/elderly care places/nursing homes are a hot bed
Quick numbers. I assume people don't increase their mortgage payment to pay off the bike in the same term as the dealer loan. No correction for inflation or time-value of money as that is difficult to come up with a reasonable number.
bike at 40K financed at 5% for 7 years through dealer = ~$47,500
bike at 40K financed through mortgage @ 2.75 financed over 25 years = ~$55,300
As of yesterday, the number of cases according to tam were going down, but deaths are still going up because somehow all the old folks homes/retirement communities/elderly care places/nursing homes are a hot bed ☹
Tam is awful. Deaths lag cases by one to two weeks in the entire population. Of course deaths will continue to rise. I would be shocked if cases are even close to going down, they are probably just going up less quickly.
Also, with the entirely inadequate testing volume, the number of reported cases closely mirrors the testing effort, not the number of infected people. New York has tested ~2.5% of the population with ~50% of those tested being positive. Ontario has tested ~0.7% of the population with 7% positive.
Ontario is not testing many people who are suspected but isolated, nor testing in nursing homes where an outbreak is confirmed. The treatment doesn't vary with diagnosis so why waste a test. I don't know if the nursing home cases/deaths are making it to the stats as many are not lab confirmed as covid.
I have no idea at all what the infection rate is in new york vs ontario in the population at large as both are targeting tests at different groups.
Quick numbers. I assume people don't increase their mortgage payment to pay off the bike in the same term as the dealer loan. No correction for inflation or time-value of money as that is difficult to come up with a reasonable number.
bike at 40K financed at 5% for 7 years through dealer = ~$47,500
bike at 40K financed through mortgage @ 2.75 financed over 25 years = ~$55,300
New York has said a few times that they do not count deaths at home or in long term care homes where the patient wasn't positively tested prior to death (they are not testing them postmortem). So lots of under reporting...
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