As most buyers should know, a lender’s pre-approval letter is the first step to literally getting their feet through the door, though where that door is located has yet to be identified. Thus, once in escrow on a property, the lender has the right to undertake its own due diligence on the property as does the buyer who is buying it subject to numerous contingencies. Many issues can come up over a 45-day escrow timeframe, on either the buyer or the lender side, that could cause the loan to NOT get funded by the close of escrow.
On the lender side, the focus is on the property now identified. Remember that when the pre-approval letter was initially provided, neither you nor the lender knew what type of property on which a loan would be needed. The lender scrutinizes the property through two main reports: the preliminary title report and the appraisal report. The title report highlights a number of matters pertaining to the property, including deeds, civil and probate court records, maintenance agreements, assessments, and debts and restrictions on the property. The appraisal report establishes an independent, unbiased opinion of value to the property and ensures the purchase price is in line with other similar properties recently sold in the immediate area.
If the lender is satisfied with the value and conditions of the asset it is underwriting and the buyer is fulfilling all the requirements of the lender, which means keeping the personal finances in the same condition as they were when the pre-approval letter was written a few weeks prior, then the lender will provide the necessary funds at the end of escrow for the buyer to purchase the property.