Ah - the LSR. Typically, the first nonsensical acronym a buyer encounters when starting to look for a home, in Tucson, and in all of Arizona. What’s an LSR, you ask?
It’s a Loan Status Report. Stupid name, I know: you have no loan yet so the status of the not-yet-in-existence loan is…?
Anywho. Here’s what you really need to know:
- You need an LSR to make an offer. Period. Which means,
- You need a lender,
- Who has pulled your credit scores
- And taken an application
- And discussed loan programs with you
- And provided you with a Good Faith Estimate
- So that we can have them fill out the LSR form when you find a home you like,
- So that we can make a successful offer to buy that home.
Formally, the LSR is required by our AAR Residential Resale Purchase Contract, the typical contract an agent would use to write an offer on a resale home. It’s really just a detailed pre-qualification letter, in a standardized form.
If you talk to a lender that says, “What’s an LSR?“, just stand up, turn around, and run away. Please, for the love of all that is good, go find a lender that knows their business, and knows how to originate loans in Arizona. I’ve got excellent recommendations, by the way, if you need them.
Go talk to a lender, and get yourself in a position where we can call your loan officer and have them send us an LSR when we’re ready to write an offer. Some lenders will give you a couple of LSRs, with the address blank and the rest filled out at various price points in your range, so that we can make offers with those forms quickly when the right time comes.
For the nitty-gritty details, read on.
You can see the form itself by clicking on the screenshot, here. It’s pretty easy to see the type of information we use to fill it out. You can see it describes your loan(s): the amount, the LTV, the rate, the term, the type. We also have to state if this will be your primary residence, what kind of home it is, if you need to sell another house in order to secure this loan. The bottom section is filled out by the lender: all “yes” checkboxes checked is the best kind of LSR.
Can you have an LSR without the lender section filled out? Yes. Is it valid? Yes. Would a Seller ever accept an offer from someone who hasn’t talked to a lender? That’s a big NO.
The Seller gets a copy of this form along with the offer so that they can evaluate your loan program, and decide if they think you’re a good risk or not. High Loan to Value ratios or high stated interest rates on the form may indicate a loan that is a little more difficult to get than someone that has 20% down and is getting a great rate. The Seller and their agent are also going to be evaluating your lender. If my Sellers have an offer come in with an LSR from a lender that I’ve had multiple bad experiences with, I’ve got a duty to tell my Seller about that.
Fun language in the LSR: “Buyer agrees to establish the interest rate and ‘points’ by separate written agreement with the Lender during the Inspection Period or the interest rate provision of the Loan Contingency shall be waived.”
We’ll write in interest rate upper limits when we fill out an LSR: if your lender is quoting you 6.5%, then we’ll probably write in 7%, just in case rates fluctuate a little. If rates go above 7%, then you don’t have to get the loan, and can walk away from the deal.
So, if you don’t lock your rate within your inspection period, typically the first 10-15 days of the deal, then you loose that contingency. If rates go above 7%, you still have to get the loan, if you qualify for it. Be aware that locking your rate may be at a cost to you, depending on the term of the lock. Most lenders will lock 30-45 days for free. If we’ve got a long escrow period, and you’ve got to lock your rate at the start of the deal, you may have to pay to get an extra long rate lock.
Lessons Learned
- Get your lending figured out early
- Use a reputable local lender
- Make sure you lock your rate in time to preserve your interest rate contingency
Happy Home Shopping!
August 14th, 2007 at 12:13 pm
> Some lenders will give you a couple of LSRs, with the address blank and the rest filled out at various price points in your range, so that we can make offers with those forms quickly when the right time comes.
Except if the final sales price doesn’t match the price on the LSR, the LSR is all but useless to the seller. Because the buyer can’t possibly qualify for the loan on the LSR if the LSR doesn’t match the sales price, which means the buyer holds a Get Out of Jail Free card all the way to the end.
August 14th, 2007 at 12:23 pm
…but it gets us into negotiations on weekends when some lenders won’t respond to LSR requests. Sellers ought to be asking for updated LSRs with final sales prices. Thanks for reminding me I didn’t really address the seller side here.