Financing A Home Purchase In Texas? Know This.

Congratulations! You're pre-approved for a loan and found a home! Here's just some of what you should know. When you're financing the purchase,  pay particular attention (in Texas) to
the second paragraph of the Third Party Financing Addendum that is part of the contract.

This document covers two types of approvals: one for you, the buyer, and one for the property itself.

If your lender has thoroughly vetted you and underwriting has checked you out six ways to Sunday and provided unconditional approval for YOU (not the house), then you and your agent can discuss checking the second box in paragraph 2A - Approval of Financing. You'll be on the hook for the loan unless the PROPERTY does not get approval. In today's market, if you can get this approval, it's one less contingency that a seller needs to consider and the seller may view your offer more favorably.

After pre-qualification or pre-approval, if a lender denies your loan due to credit history, income, assets or for another reason, this falls under the first part of Paragraph 2A - Approval of Financing. To receive your earnest money back, you'll have to terminate the contract within the time specified in the (hopefully filled in) blank field in that paragraph. In my experience, this is usually 21 days or less.

What happens if the property isn't approved? This could be due to circumstances such as a low appraisal, insurability, or lender-required repairs. Paragraph 2B - Property Approval, covers this. The time period to terminate under this provision is no later than three days before closing. You'll need to provide to the seller and title company a letter from the lender stating why the property approval wasn't granted.

To summarize, financing on the Third Party Financing Addendum is a 2-part process: buyer approval and property approval. Make sure you understand both parts and what the deadlines are for each part.

If you or your Texas real estate agent have questions about the Third Party Financing Addendum,  the agent has access to the Texas REALTOR's hotline: 800-873-9155.