This BLOG On Mortgage Approval Without Real Estate Purchase Contract Was UPDATED And PUBLISHED On November 20th, 2020
The first step in buying a new home is getting qualified and pre-approved by a loan officer.
- Many lenders now offer Mortgage Approval Without Real Estate Purchase Contract
- Getting Mortgage Approval Without Real Estate Purchase Contract is called TBD Underwrite
- The lender will process the mortgage loan applicant
- Underwriters will do a full credit/income underwrite and the only thing that is not underwritten is the subject property
- Once an underwriter gives a conditional Mortgage Approval Without Real Estate Purchase Contract, the only condition that is missing is the property
- A borrower with a conditional Mortgage Approval Without Real Estate Purchase Contract is a much stronger home buyer than one that is just pre-qualified
In this article, we will cover and discuss Mortgage Approval Without Real Estate Purchase Contract.
Buying Home After TBD Underwrite Approval
Once a borrower has a solid TBD Underwrite Approval, the only conditions that is missing is the property. The property needs to be underwritten. Appraisal and title needs to be ordered.
- Before signing a real estate purchase contract, homebuyers need to think things through so that nothing comes back to bite them at the end and the earnest money is not in jeopardy
- There are many things buyers need to consider when putting in an offer on a new home
Mortgage contingency, home inspection contingency, appraisal contingency, or items needing repairs should all be on the purchase contract.
Mortgage Contingency On Real Estate Purchase Contract
All contingencies should be stated on the real estate purchase contract.
- A mortgage loan contingency is probably the single most important item you need to address in the real estate purchase contract
- Just because home buyers have a pre-approval does not guarantee that mortgage loan is going to go through
- If borrowers cannot provide conditions on conditional approval, the mortgage lender may deny the loan
- There are instances where homebuyers can lose their jobs during the mortgage process which will either delay closings or kill the deal
- What a mortgage contingency provides is that the real estate purchase contract is only valid if the borrowers are able to secure a mortgage commitment within a certain amount of time
- The transaction is only valid dependent on the home buyer getting a mortgage approval
It will enable buyers to cancel a real estate purchase contract if they are not able to obtain a residential mortgage loan commitment.
Contingencies On Real Estate Purchase Contract
The normal mortgage contingency period is between 14 and 25 days from the real estate purchase contract date.
- The earnest money you deposit with real estate purchase contract will be in jeopardy once the mortgage commitment period has expired
- However, with a Mortgage Approval Without Real Estate Purchase Contract, the home buyer is already conditionally approved contingent upon property appraisal and clear title
- Depending on how the real estate purchase contract is written, home buyers without Mortgage Approval Without Real Estate Purchase Contract can lose your earnest money deposit once their mortgage contingency period has expired fail to close on their home
- The lender will require the real estate purchase contract
- Lenders will monitor mortgage contingency date for borrowers without Mortgage Approval Without Real Estate Purchase Contract
- Buyers need to ask sellers for an extension with delays getting obtaining a formal mortgage commitment
The greatest benefit of Mortgage Approval Without Real Estate Purchase Contract is that the borrower is already conditionally approved for a mortgage.
Real Estate Purchase Contract Due Diligence Period
The real estate purchase contract will contain a due diligence period where buyers have a certain amount of time for due diligence on the property.
- During this period, the home buyer will be working on the mortgage loan approval, order the home appraisal, order property inspection, order well and septic inspections, and order termite inspection reports
- Most real estate purchase contracts are drawn up for 30 to 45 day periods
Sometimes it may be as long as 60 days or longer especially homes that are being purchased by a home builder, short sale, and not yet built or currently under construction.
A home inspection is strongly recommended for all home buyers and should be part of the real estate purchase contract. The purchase contract is only valid if the house passes a third-party home inspection.
- There probably will be a home inspection period in the contract
- A home inspector will inspect the home and get buyers a report
- If buyers do not utilize a home inspector during that period, the home inspection contingency will expire
- A home inspector will reveal any major flaws with the home
- If there are the extensive foundation, structural, and/or mechanical defects on the subject property, it might be wise to pass on the home and move on
- In the event, if there are many flaws on the home inspection report, homebuyers can negotiate the subject items with the seller
Monetary credit or repairs prior to closing or reduction of the original purchase price can be part of the negotiation terms.
Depending on which area the home is, a termite inspection may be recommended.
- The lender might also require a termite inspection if the appraiser notates on appraisal report that there are signs of termites
- HUD mortgage lending guidelines state that a termite inspection is required only if there is evidence of active infestation or if it is required by either the local, county, or state building code departments, or if it is customary for the region, or at the mortgage lender’s discretion
In the event, if there are termites present at the subject property. it is up to both the seller and buyer to negotiate who will correct the damage caused by termites and the termite abatement program.
Request Sellers Concession Towards Closing Costs
Have the realtor request a seller’s concession towards closing costs.
- FHA loans allow up to a maximum of 6% sellers concessions towards a buyers closing costs
- Closing costs include prepaid items such as tax escrows, insurance escrows, title charges, recording fees, transfer stamps, and other closing costs that the buyer would otherwise have to come up with besides the down payment
- Do not ask for too much sellers concessions because overages in sellers concessions go back to the seller and it does not come to the buyer in any other form as a cashback
- Home Buyers cannot use sellers concessions towards your down payment
- Sellers concessions towards buyers closing costs need to be stated and disclosed on the real estate purchase contract
- The maximum amount 3% sellers concession is allowed on owner occupant conventional and jumbo loans
- 2% sellers concessions on investment property conventional loans
- 4% sellers concessions on VA Loans
- 6% sellers concessions on USDA Loans
- 6% sellers concessions on NON-QM and Bank Statement Mortgage Loans for self-employed borrowers
Why Do We Close 100% Of Our Pre-Approvals & Other Lenders Don’t?
There is a big difference between pre-qualification and pre-approval.
- Most lenders consider a pre-qualification a pre-approval and issue it within the hour of reviewing a mortgage applicant’s file
A true pre-approval is issued by a mortgage underwriter after the underwriter has reviewed the borrower’s following:
- credit scores
- credit history
- public records
- all documentation
Gustan Cho Associates will only issue pre-approvals after the mortgage underwriter has signed off on it.
Home Buyers needing a Mortgage Approval Without Real Estate Purchase Contract (TBD Underwrite) with a direct lender with no lender overlays, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at email@example.com. We are available 7 days a week, evenings, weekends, and holidays.