Loan Status Report Replaced by Pre-Qualification Form
The Arizona Association of Realtors, in an effort to solve some of the financing problems through the timeline of the transaction, is instituting some changes to the purchase contract and the associated financing documents involved. Currently, and until February 28th, we still have the old contract and what’s known as a Loan Status Report.
When you apply for a mortgage, the mortgage lender provides you with what’s known as a Loan Status Report that defines the terms of the loan and is to be included with a purchase contract in order for the contract to be complete. This is going away. We will no longer be required to have a Loan Status Report as part of the Arizona Purchase Contract.
In lieu of the LSR, a new form has been created which is called the Pre-Qualification form. One of the problems that I have faced as a listing agent when a buyer’s agent submits a contract is that often I’ll receive a contract without the LSR (remember, if there’s financing, the LSR is required currently) or the LSR won’t be signed. Sometimes those purchase contracts have short response deadlines and without the LSR, valuable time is wasted and sometimes contracts expire.
Starting February 28th, we’ll not only be using the Pre-Qualification form, but we’ll also be using the new purchase contract which has a revamped finance section and other various changes for the better. One of those changes comes in the form of an agreement by the buyer’s lender to provide a Loan Status Update to the seller within 5 days of contract acceptance. There is no longer a requirement to provide the Loan Status Report, but there is a section on the new contract which allows the buyer to indicate whether or not a Pre-Qualification is included. Obviously, a contract requiring financing without a Pre-Qualification form isn’t going to be a strong offer and may simply be ignored by the seller.
I’m okay with this. I have had enough of a challenge a) explaining to a new buyer what a Loan Status Report is, b) chasing down buyer’s agents for Loan Status Reports, and c) writing addenda to extend contract expiration dates to make time to do so, that it’s about time we have a better flow of information.
Make sure you grab a copy of the Pre-Qualification form so you know what to expect when you start searching for the right mortgage.