Recently one of our clients in Hutchinson, MN had an experience with one of the “big” mortgage companies that I want to share with you.
They decided to sell the home they currently live in and buy a larger home. They went to the mortgage company and made loan application based on them selling their current home (which they were selling on a contract for deed.) They were also putting 30% down on the purchase of the new home.
The pre-approval letter they got from the mortgage company said that one of the conditions was that the contract for deed be executed. They and their buyer signed the contract for deed and it was recorded at the courthouse.
One week before they were scheduled to close on their new home, the mortgage company’s underwriting department denied their mortgage application for the new house stating that they “wanted one year’s history of payments made on time with the contract for deed.” The original pre-approval said nothing about payment history on the contract for deed, just that it needed to be executed!
Fortunately for this client, they had other resources so they were still able to purchase their new home, but needless to say, they were not happy with the mortgage company.
So, even though you have a pre-approval in writing with certain stipulations, be cautious because they could change their mind.