What Is TBD Underwriting Guidelines?
Updated TBD Underwriting Guidelines:
TBD stands for To Be Determined. A TBD Underwriting is when a mortgage loan application is processed and submitted to underwriting without a subject property. With traditional underwriting, the mortgage loan applicant first obtains a pre-approval by a mortgage loan originator. The mortgage loan originator reviews the mortgage loan application and reviews the mortgage applicant’s credit scores and credit report. The mortgage loan originator then collects documents such as two years tax returns, two years W-2s, 60 days bank statements, most recent paycheck stubs, and other documents that pertains 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 mortgage lenders need to go forward. Once the mortgage loan applicant gets an approve/eligible per automated findings, a pre-approval is issued.
Some mortgage lenders such as myself have no lender overlays and will go off automated findings. As long as we get an approve/eligible per DU FINDINGS and/or LP FINDINGS, we will just go off the findings and normally we have no issues and close on the mortgage loan. However, even if you get an approve/eligible per automated findings, you can run into issues especially if you have higher debt to income ratios .
Home buyers who have higher debt to income ratios can really run into problems if they run into cost overruns such as 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 back end debt to income ratios is capped at 56.9%. 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 higher debt to income ratios have a risk factor that they might have the potential of a mortgage loan denial.
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 has the discretion of either using overtime income, part time income, bonus income or discounting the overtime income, part time income, bonus income, or not counting those income all together in the event of declining overtime, part time, and bonus income. The underwriter’s decison is not known until the file in underwriting so many home loan 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 mortgage loan borrower needs this income to meet the debt to income ratio requirement, the mortgage loan application will be denied. These case scenarios is when a TBD Underwriting is the mortgage approval process of choice.
TBD Underwriting Guidelines: 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 shortens the waiting period after bankruptcy and foreclosure to a one year waiting period. The standard waiting period after bankruptcy is 2 years after the discharge date of the bankruptcy and 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 where a mortgage loan 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 gotten denials. The FHA Back to Work mortgage program is a great program where a TBD Underwriting will be ideal. We recommend a TBD UNDERWRITING ON BACK TO WORK MORTGAGES due to the high rate of mortgage loan denials.
TBD Underwriting Guidelines: Mortgage Lenders
Not too many mortgage 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. Instead of going through getting a purchase real estate contract and putting down earnest money, spending money for a home inspection, and taking a potential chance of a mortgage loan denial, why not go through a TBD Underwriting and get the mortgage approval first and after you get 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 .
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