Home buyers caught in a bidding war know that it’s hard to compete against an all-cash offer. Cash buyers accounted for 33% of all home purchases in June 2014, down from a peak of around 43% in late 2011 and early 2012. Cash purchases accounted for 46.5% of sales in the New York-Jersey City-White Plains, N.Y., region. With the right strategy, however, jumbo borrowers can win in the end.
To compete, potential buyers should go beyond the standard preapproval letter. The lender issues these based on the borrower’s stated income and assets; they can even be done online with an automated response. Instead, secure a pre-underwriting letter for a specific loan amount. In pre-underwriting, the lender is getting all income and asset documentation and submitting it to an underwriter. Since the documentation is deeper, a pre-underwriting letter has more clout than a preapproval. Pre-underwriting is important for everyone, but even more important for somebody with a more complicated tax return. A pre-underwritten jumbo mortgage typically closes in about 14 days as opposed to up to 30 days for a preapproved loan.
Wall Street Journal, October 10, 2014
