Mortgage Approval with a TBD Property vs. Mortgage Pre-approval Letter

Mortgage Approval with a TBD Property vs. Mortgage Pre-approval Letter

Are you looking for a mortgage pre-approval letter? A mortgage approval will vary by lender due to mortgage guidelines varying. If you are working with a lender without an internal guideline, a mortgage overlay, you should have a smoother loan process and experience easier underwriting standards.

The purchase process should always start with the pre-approval process by verifying assets, income, and credit. Loan Originators often have a different mortgage pre-approval process, which some are more meticulous than others. Just because a borrower has a mortgage pre-approval letter does not mean they are going to close on the loan.

Mortgage Approval vs. Mortgage Pre-approval Letter

Once you are under contract, an underwriter still has to review and determine if credit, capacity, and collateral are up to underwriting standards to issue the clear to close.  A TBD pre-approval process is an optional and additional step to obtaining a solid mortgage pre-approval letter, which credit, income, and assets are verified by an underwriter. This calls for a quicker process since credit and capacity are already determined based on a maximum mortgage payment.

The TBD Property Mortgage Pre-approval Process

The TBD property mortgage approval is a way to have a rock solid pre-approval where income, assets, and credit are reviewed by an underwriter rather than a Mortgage Loan Originator.

1^st step: the process starts by a licensed Mortgage Loan Originator taking a complete application without a property.

• On the application, the subject property will have TBD and the Loan Originator will ask for details just as if they were going to submit the loan with a property.
• An experienced Mortgage Loan Originator will send a list of documents that are going to be required for submission.

2^nd step: once a complete 1003 (Uniform Residential Loan Application) is complete and necessary documents are gathered to submit:

• The Loan Originator reviews all documents and runs the Automated Underwriting System (AUS).
• Note that some Loan Originators do not have access to the Automated Underwriting System (AUS) and rely on other people in their company to run the program.

At Nationwide Mortgage & Realty, LLC our Mortgage Loan Originators have access and are able to run the Automated Approval System (AUS) the same day documents are received.

3^rd step: after a complete credit package, loan application, credit report, income, and assets have been gathered, the package is sent to an underwriter for review. Once reviewed by an underwriter, they will issue a mortgage commitment subject to a sales contract, appraisal on the property, and other property documentation.

• The Loan Officer will have a loan commitment with information regarding credit and capacity.

Advantages of TBD Property Mortgage Pre-approval

• A complete credit package, loan application, credit report, income, and assets are already verified by a underwriter.
• The TBD mortgage pre-approval letter often gives negotiating power when putting an offer in on the house.

The TBD property mortgage pre-approval takes a little longer than just going through the pre-approval process without an underwriter verifying documents. An experienced Mortgage Loan Originator usually will not dismiss a borrower that has been denied, but tell them what they need to work on in order to get pre-approved for a home.

Issuing a Mortgage Pre-approval Letter

• Just because a mortgage pre-approval letter has been issued, does not mean that a borrower is guaranteed a loan.
• There are still home buying do’s and don’ts that a borrower should understand can delay the process or even result in a denial.

A mortgage pre-approval letter should always be written based on a credit report, income, and assets that were provided.

Determining What You Qualify For

There should be a set:

• Maximum mortgage payment.
• Purchase price.
• Loan amount (can vary depending on tax bill and home owners insurance).
• Loan program.
• Maximum loan-to-value.
• Term of the loan.

Even if a borrower qualifies, does not mean that a property will qualify. The clear to close is obtained by clearing all borrower related and property related conditions.

Once the purchase contract is accepted:

• The application and disclosures will be sent out.
• If applicable, an appraisal will be ordered.
• Taxes and home owner’s association dues should already have been factored.
• Will need a clear title.
• Will need a acceptable homeowner’s insurance policy.
• Life of a loan flood certification should be furnished.