What Is a TBD Underwriting Process Pre-Approval Letter

This article will discuss a TBD underwriting process and a TBD property pre-approval letter. In the following paragraphs, we will explain a TBD underwriting process. A TBD underwriting process pre-approval commands weight because it is a full mortgage underwriting pre-approval less the subject property:

The loan officer wants every deal to close, so they are trigger-happy in issuing pre-qualification letters. The reason we do not do this at Preferred Mortgage Rates is clear.

One of the best services offered by Preferred Mortgage Rates is our TBD underwriting process. I am sure everyone reading this has heard or experienced the nightmare of a closing gone bad. The following paragraphs will cover the TBD underwriting process at Preferred Mortgage Rates.

TBD Underwriting Process versus How Loan Officers Issue Pre-Approvals

Loan officers will receive an application, pull credit, verify assets for the down payment, and issue a pre-qualification letter. The problem with this practice is there is much more to a credit report than just your credit score, such as collections, judgments, disputed accounts, charged-off accounts, and sometimes, bankruptcies.

Clients often cannot close their homes due to an error by a loan officer. Or a loan officer is telling the client what they want to hear, NOT the facts.

Is a TBD Underwriting Process a Commitment to Lend?

That being said, wouldn’t you like the peace of mind of knowing that your loan pre-approval is a true commitment to lend? We do this to ensure you don’t lose any earnest money put down on the home! The old-fashioned process of a loan pre-qualification letter from your loan officer does not work anymore. With the ever-changing guidelines and regulations in the mortgage industry, many loan officers DO NOT know all the guidelines.

Have confidence in submitting your offer knowing our underwriting staff has signed off your information! Your realtor will love you when they see your pre-approval letter has an underwriter’s signature at the bottom!

You don’t want to pay for an inspection and appraisal to get your loan denied once it gets to an underwriter. We have also found that our real estate partners are much more willing to work with you and be aggressive because they know the deal will close! Once you have that pre-approval, you know the exact payment amount you qualify for, so it’s happy house hunting for you and your family!

Who Can Use TBD Underwriting Process?

Any home buyer who wants a solid iron-clad pre-approval that has been fully underwritten and signed off by our mortgage underwriters. This process is designed for tricky files or borrowers who another lender has turned down! A TBD underwriting process pre-approval is similar to a loan commitment without a subject property:

We underwrite the file with an address TBD (to be determined). We will qualify you for a payment comfortable for you and your family, or we can tell you the maximum payment you will qualify for.

Many of our clients have been dealing with lenders who have lender overlays are were turned down. The TBD process can save the day! With a TBD Underwriting Pre-Approval, buyers can rest assured there will be no stress and that they will not just close on their home loan but will close it on time.

How Does The TBD Underwriting Process Work?

The process is very simple and similar to the old-fashioned method. After your initial consultation with your licensed loan officer, you will fill out an application link. That will allow the loan officer to start your file and verify your credit report.  While they are working on that, you need to send the following information to get your underwriting process started:

• Last 60 Days Bank Statements – to source down payment
• Last 30 Days’ Paystubs
• Last Two Years, W2
• Last Two Years’ Tax Returns
• Driver’s License

Once the loan officer has these documents, they will send you three pages to print, sign, and return. Those documents are:

• SSA Release SSN Verification
• Borrower’s Certification & Authorization
• Loan Request Consumer Information Letter

Remember, this service can take the guessing and apprehension out of the home-buying experience. This process is supposed to be fun, not stressful!

Reviewing Mortgage Documents In The Mortgage Process

Your loan officer will review each document so you fully understand each step. Once these are returned with proper signatures, the file will be moved to the underwriter. I am sure you are wondering how we can underwrite your file if you don’t have a house picked out. The answer is simple. Below, you can download an “Underwriting and Loan Approval Process” by FDIC.gov. Once you receive your pre-approval, you can shop for a house.

Please remember that you are approved based on your current situation and debt-to-income ratio. So it is your responsibility to keep your financial situation stable while you shop for houses.

Here are a few examples of killing your pre-approval: Take out new debt – buying a car during this process is not a good idea. Lose your job. Spend your assets we used to approve you. In today’s competitive real estate market, most realtors will not even talk to you without approval. Please get in touch with us at Preferred Mortgage Rates at 844-90-RATES. Or text us for a faster response. You can email us at gcho@gustancho.com to get your approval started and make your underwriting process smooth.

How Sellers Give Priority To Cash Offers: Benefits Of Home Buyers With TBD Mortgage Approvals

Difference Between TBD And Regular Pre-Approvals

The loan officer then collects documents such as the following:

• two years tax returns
• two years W-2s
• 60 days bank statements
• most recent paycheck stubs
• other documents that pertain to the qualifying the mortgage loan applicant

The mortgage loan originator then submits the mortgage application to the automated underwriting system for a decision:

• An approve/eligible per DU FINDINGS and/or LP FINDINGS is what lenders need to go forward
• Once the mortgage loan applicant gets an approve/eligible per automated findings, a pre-approval is normally issued by the loan officer

TBD Underwriting Approvals are solid loan commitments where it has been fully underwritten and signed off by our mortgage underwriters.

Automated Findings

Some lenders like Gustan Cho Associates has no lender overlays:

• Gustan Cho Associates just go off automated findings
• As long as borrowers get an approve/eligible per DU FINDINGS and/or LP FINDINGS, we will just go off the findings
• We have no issues and close on the mortgage loan
• However, even with an approve/eligible per automated findings, borrowers can run into issues especially if you have a higher debt to income ratios.

Home Buyers With High Debt To Income Ratios

Homebuyers who have a higher debt to income ratios can really run into problems if they run into cost overruns such as the following:

• higher homeowners insurance premiums
• or if the underwriter may not count overtime income
• bonus income
• part-time income or other income

With FHA Loans, the maximum front end is capped at 46.9% and back end debt to income ratios is capped at 56.9% to get an approve/eligible per automated underwriting system:

• There are many mortgage loan applicants who I represent that are at the maximum 56.9% debt to income ratio
• A one-dollar increase in monthly payments will automatically disqualify this mortgage loan applicant
• Buyers who have a higher debt to income ratios have a risk factor that they might have the potential of a mortgage loan denial

This is why a borrower who has credit issues and/or higher debt to income ratios should get a TBD Underwriting Approval by a loan officer versus a pre-approval signed off by a loan officer.

Borrowers With Overtime Income, Part-Time Income, Bonus Income

Technically, overtime, part-time, and bonus income can be used to qualify as income as long as the mortgage loan applicant has a two-year history.

• However, mortgage underwriters have the discretion of either using overtime income, part-time income, bonus income or discounting it
• The overtime income, part-time income, bonus income, or not counting that income all together in the event of declining over time, part-time, and bonus income is up to underwriter’s discretion
• The underwriter’s decision is not known until the file in underwriting
• So many borrowers who are counting on this income to qualify do not know the final outcome until the whole mortgage application package is in front of the mortgage underwriter for review
• If the mortgage underwriter uses underwriter’s discretion and excludes the overtime, part-time, or bonus income and the borrower needs this income to meet the debt to income ratio requirement, the loan application will be denied

These case scenarios are when a TBD Underwriting is the mortgage approval process of choice.

TBD Underwriting Guidelines On FHA Back To Work Extenuating Circumstance Due To An Economic Event

HUD has launched the FHA Back to Work Extenuating Circumstances due to an Economic Event mortgage loan program on August 15, 2013, where it shortened the waiting period after bankruptcy and foreclosure to a one year waiting period.  Unfortunately, this program turned out to be a total flop. Very few of these loans ever made it to the closing table.

• The standard waiting period after bankruptcy is 2 years after the discharge date of the bankruptcy
• The standard waiting period is 3 years after foreclosure, deed in lieu of foreclosure, and short sale
• All FHA Back to Work mortgage loan applications are manual underwriting
• Manual underwriting is where a mortgage underwriter will personally review and decide on whether or not to approve the mortgage loan application
• Since the inception of the FHA Back to Work Extenuating Circumstances due to an economic event mortgage loan program, many applicants have gotten denials
• The FHA Back to Work mortgage program would have been a great program where a TBD Underwriting will be ideal
• We would have recommended a TBD UNDERWRITING ON BACK TO WORK MORTGAGES due to the high rate of mortgage loan denials

Unfortunately, TBD Underwriting Guidelines were not existent when the Back To Work Loan Program was in effect. Today HUD has discontinued the FHA Back To Work Mortgage.

TBD Underwriting Guidelines And Lenders With No Overlays

Not too many lenders will take on a TBD Underwriting mortgage application.

• Fortunately, we are able to do TBD Underwriting Guidelines
• TBD Underwriting Guidelines benefits higher risk mortgage loan applicants where their chances are 50/50 in getting a mortgage loan approval

With a TBD Underwriting Loan Approval, borrowers do not have to go through the following:

• Go through getting a purchase real estate contract
• Putting down earnest money
• Spending money for a home inspection
• Taking a potential chance of a mortgage loan denial

Why not go through a TBD Underwriting and get the mortgage approval first. After getting the mortgage loan approval the only condition left is to get a real estate purchase contract and appraisal and you will get a clear to close.