Obtaining Final Loan Approval

By Raymond Stoklosa · September 10th, 2008

San Mateo Loan Approval
We tell our clients all the time “Find a Loan, Then Find a Home”. But, being pre-approved, while incredibly important, is only part of the loan approval process. This is the first and crucial step where the lender deems you, as a buyer, qualified to receive the loan.

The second half to the loan approval process is the final approval by the lender. This is where the lender accepts the property as sufficient collateral for the loan. Logically, you wouldn’t expect someone to accept a fake diamond ring as collateral for a $5,000 loan, and obtaining final loan approval protects the lender from this scenario. This is how it works…

Once the buyer is in contract to purchase a specific home, the lender orders an appraisal from an approved appraiser. Generally, if the appraiser establishes the value to be at least as much as the purchase price of the property, the lender accepts the property as sufficient collateral for the loan.

What can go wrong with the appraisal findings? Common examples are additions or significant improvement constructed without proper building permits and/or serious pest damage noted.

Following the appraisal review, the lender evaluates the preliminary title report issued by the title insurance company. This report is the basis for the title insurance policy that will be issued. (Title insurance is basically an insurance policy that says that you own the house with a clear title and no one else has the rights to it.)

What can go wrong with title reports? Encroachments, clouds on the title or claims to the property can all cause problems.

Once the appraisal and title reports are reviewed and accepted, final loan approval is issued. Now the lender is ready to fund the loan. And now, you are ready for the next step in the home buying process: Signing the Escrow Instructions and Loan Documents.

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