This BLOG On TBD Pre-Approval Mortgage Guidelines For Bad Credit Borrowers Was UPDATED And PUBLISHED November 20th, 2020
There are times when there are gray areas in agency mortgage guidelines where the pre-approval issued by loan officers may be in doubt.
- This holds true on manual underwriting files. FHA and VA Loans allow for manual underwriting
- Conventional Loans do not
- Borrowers who get a refer/eligible per AUS FINDINGS may qualify for manual underwriting
- Manual Underwriting Guidelines on VA and FHA Loans normally require timely payments in the past 24 months
- However, as there are exceptions where borrowers with extenuating circumstances can have late payments in the past 24 months
- To a loan officer, the deal may fly
- However, mortgage underwriters have the ultimate say-so on whether the file will get approved or not
- It will be extremely dangerous for a loan officer to issue a pre-approval on a borrower with marginal and bad credit
- Cases like these should be done with TBD Pre-Approval Mortgage Approvals by mortgage underwriters
Gustan Cho Associates are one of the few national mortgage lenders who offer TBD Pre-Approval Mortgage Underwriting Approvals by underwriters.
Is TBD Pre-Approval Versus Standard Pre-Qualification Required
The pre-approval process is the most important stage of the overall mortgage process.
- The number one reason for last minute mortgage denial and/or stress during mortgage process is due to borrowers not being properly qualified.
- Homebuyers trust their loan officers and their pre-approvals
- Most of the time, a loan officers pre-approval letter should be rock solid
- However, there are times when borrowers have bad credit and are not qualified but the loan officers issue a pre-approval letter
- Homebuyers rely on this pre-approval letter and enter into a real estate purchase contract
- The loan gets processed and underwritten and the underwriter issues a denial
- A lot of peoples lives are affected, Buyers, sellers, buyers, and sellers attorneys and realtors
- Plus all the work is done by the lender with a non-qualified borrower
Cases like these should be done with TBD Pre-Approval Mortgage where the file gets processed and underwritten before borrowers enter into a purchase contract. This holds true on manual underwriting on VA and FHA Loans.
How Does TBD Pre-Approval Process Work
TBD Pre-Approval Mortgage Approvals are full credit loan approvals that have been processed, underwritten, and issued by mortgage underwriters.
- The only item missing will be underwriting the property which includes the home appraisal
- TBD Pre-Approval Mortgage is same as a conditional loan commitment and/or conditional mortgage approval
Steps In TBD Pre-Approval Underwriting
TBD Pre-Approval Mortgage Approvals should be a must for borrowers with shaky credit and late payments after bankruptcy and/or housing event on manual underwrites. All refer/eligible per automated underwriting system should be submitted as TBD Pre-Approval Mortgage Approvals.
- Loan Officers will run credit, docs, and run automated underwriting system
- Once the loan officer collects all docs, it will be assigned to a mortgage processor
- The processor will process the loan just like it were a live file with the exception of an executed real estate purchase contract
- Where the property address is required on the 1003 Mortgage Application. TBD Property is listed instead of a live address
- Loan officers need to complete the full 1003 (Uniform Residential Loan Application)
Loan Officer will run the file through Automated Underwriting System (AUS).
Underwriting TBD Pre-Approval Files
The file is thoroughly processed by a mortgage processor.
- It is then submitted to the mortgage underwriter
- Mortgage underwriters do a full credit and income underwriting just like they would any other loan file
- This is done with the exception of the subject property
Once the underwriter feels borrower meets all agency guidelines and their lender’s overlays, the underwriter issues a loan commitment which is the TBD Pre-Approval Mortgage Approval.
Benefits Of TBD Pre-Approval Underwriting Approvals
TBD Pre-Approvals benefits borrowers with bad credit on manual underwriting:
- Borrowers with late payments after bankruptcy and/or foreclosure
- Borrowers with late payments in the past 12 to 24 months
- Borrowers with multiple job gaps
- Self-employed borrowers
- Sellers like TBD Pre-Approval Mortgage Approvals
TBD Pre-Approval Underwriting Approvals does take time. It normally takes two weeks for a TBD Approval. However, the benefits are worth the wait. TBD’s are full loan commitments. As long as nothing is wrong with the property, borrowers can rest assured that the loan will not just close but close on time.
Shopping For Homes With Solid TBD Pre-Approval
After borrowers get a TBD Pre-Approval Letter, they can now shop for a home with solid confidence. This approval is almost the same as cash. As long as the property qualified and meets guideline requirements, the loan will close. This only holds true if there are no changes in borrowers’ credit/income profile. Again, nothing is a done deal until the loan closes. If there are changes in borrowers’ income, credit, and/or other factors, the TBD Pre-Approval can become null and void. Gustan Cho Associates are national lenders with no overlays on government and conforming loans. We are also experts in non-QM and bank statement loans for self-employed borrowers. Please contact us at Gustan Cho Associates Mortgage Group at 262-716-8151 or text us for a faster response. Or email us at firstname.lastname@example.org.