FAQs About the 2011 AAR Pre-Qualification Form
Posted on January 1, 2011 by Michelle Lind, Esq.
Sample Form: Pre-Qualification Form This form will go live on zipForm® as of February 28, 2011.
(“Contract” refers to the 2011 AAR Residential Resale Real Estate Purchase Contract.)
QUESTION P-1 Q: What is the purpose of the Pre-Qualification Form? A: The Pre-Qualification Form was developed to provide information on the buyer’s ability to qualify for a loan without a Good Faith Estimate (“GFE”). The new form provides more information than provided on the current Loan Status Report. The form sets forth the loan amount for which the buyer can prequalify, assuming a maximum monthly housing payment.
QUESTION P-2 Q: Why isn’t the Pre-Qualification Form property specific? A: The Real Estate Settlement Procedures Act (“RESPA”) requires a property address before a GFE may be provided by a lender. Thus, the Pre-Qualification Form is designed to provide information on the buyer’s ability to qualify without a GFE.
QUESTION P-3 Q: Who should complete the Pre-Qualification Form? A: The lender.
QUESTION P-4 Q: Why is marital status requested? A: The lender will require the buyer to disclose marital status to obtain a loan. Arizona is also a community property state. If a married borrower is purchasing a property in Arizona without their spouse, there will be specific title requirements that may impact the ability to close a transaction. HUD also requires lenders to consider the debts of a non-purchasing spouse when the property being purchased is located in a community property state.
QUESTION P-5 Q: What is a USDA loan? A: A USDA-guaranteed loan is a government-insured purchase loan. USDA loans are only offered in rural areas and serviced by direct lenders that meet federal guidelines.
QUESTION P-6 Q: Why are Planned Unit Development, Manufactured Home and Mobile Home included on the form as property types? A: These types of property are eligible for different loan programs. Therefore, these properties are evaluated based on different loan criteria and documentation than other properties.
QUESTION P-7 Q: What is the difference between a manufactured home and a mobile home? A: A “manufactured home” means a structure built in accordance with the National Manufactured Home Construction and Safety Standards Act of 1974 and Title VI of the Housing and Community Development Act of 1974 after June 15, 1976. A “mobile home” means a structure built prior to June 15, 1976, on a permanent chassis, capable of being transported in one or more sections and designed to be used with or without a permanent foundation as a dwelling when connected to on-site utilities, except recreational vehicles and factory-built buildings. (See A.R.S. § 41-2141 et. seq.)
QUESTION P-8 Q: What “other” property types are there beyond those listed? A: Co-op or condo-tel (condo hotel) properties would be examples of other property types.
QUESTION P-9 Q: Why is the maximum total monthly housing payment indicated on the form? A: The loan amount that a buyer can qualify for is based not only on a monthly principal-and-interest loan payment but on a total monthly housing payment, which includes property taxes, homeowner’s insurance, HOA fees and flood insurance costs.
QUESTION P-10 Q: Why is the lender company’s Arizona license number requested? A: As of July 1, 2010, in order to transact business as a mortgage originator, the originator must work for a licensed mortgage banker, licensed mortgage broker or an exempted entity. An exempted entity would be a federally chartered institution and thus would not have an Arizona License number. All non-exempted entities will be licensed as either a BK (Banker) or MB (Broker). (See A.R.S. § 6-991.02(14): http://www.azleg.state.az.us/FormatDocument.asp?inDoc=/ars/6/00991-02.htm&Title=6&DocType=ARS.) For more information, visit the Department of Financial Institutions website at http://www.azdfi.gov/Licensing/NMLSLO/nmlslo.html.
QUESTION P-11 Q: What is the difference between a mortgage broker and mortgage banker? A: As set forth above, the lender’s license number will indicate whether the entity is a banker or a broker. A mortgage banker is a lending institution that offers a variety of loans, funded with the bank’s assets or by use of a credit line issued in the bank’s name. A mortgage broker generally is an intermediary who brings borrowers and lenders together but does not use its own money to fund the loan.
QUESTION P-12 Q: Why is the lender’s loan officer’s NMLS number requested? A: “NMLS” means the National Mortgage Licensing System, and all residential loan originators must be licensed or registered through this system. (See A.R.S. § 6-991.02(14): http://www.azleg.state.az.us/FormatDocument.asp?inDoc=/ars/6/00991-02.htm&Title=6&DocType=ARS.) For more information, visit the Department of Financial Institutions website at http://www.azdfi.gov/Licensing/NMLSLO/nmlslo.html.
QUESTION P-13 Q: Why is there an expiration date on the Pre-Qualification Form? A: A pre-qualification generally expires when the credit report expires – typically within 60 days.
QUESTION P-14 Q: What happens if the buyer makes an offer without submitting the Pre-Qualification Form?
A: Section 2e of the Contract requires the buyer to deliver an LSU to the seller describing the current status of the buyer’s proposed loan within five days after Contract acceptance. The LSU will contain most of the information contained in the Pre-Qualification Form.
The AAR Residential Contract Revision Workgroup was led by Jim Sexton, chair, with the valuable assistance of workgroup members Amy Swaney (lender representative), John Lotardo (title/escrow representative), Kelly Hand, Martha Appel, Holly Mabery, John Foltz, Kerry Melcher, Jerome King, Paula Monthofer and AAR staff Christina Smalls and Jan Steward.