TBD Property: Mortgage Application Process Before Entering Into Purchase Contract

If you are a home buyer, the traditional way of going about in getting a mortgage pre-approval is to contact a mortgage lender to see if you can get pre-approved.  The pre-approval is not an official approval and is by no means a guarantee that your mortgage loan will get approved.  A pre-approval is issued when you complete a 1003 four page mortgage application and your mortgage loan originator will review the mortgage loan application and run a tri-merger credit report and evaluate your credit scores.  The mortgage loan originator will then submit your mortgage file including your credit report to either Fannie Mae’s Underwriting System for an approve/eligible per DU FINDINGS or Freddie Mac’s Automated Underwriting System for an approve/eligible per LP FINDINGS.  Once you get an approve/eligible, you will then be issued a pre-approval letter.  You then can go and start shopping for a home.  Shopping for a home you really like can take as little as a day or several weeks to even longer.  Once you get a home you really like, you then enter into a real estate purchase contract.  Once your mortgage loan originator has the purchase real estate contract is when he or she can officially start processing your mortgage application and the mortgage approval process starts.

Mortgage Approval Process

The traditional mortgage approval process starts once you enter into a real estate purchase contract and both parties, the buyers and sellers, sign the real estate purchase contract.  The mortgage application cannot be dated prior to the real estate purchase contract.  Once you submit the real estate purchase contract, the mortgage loan originator will send you an official mortgage application and mortgage disclosure package which you must sign and send back.  You will also get a list of items that the mortgage lender will require such as two years tax returns, two years W-2s, 60 days bank statements, recent paycheck stubs, bankruptcy documents if it applies to you, foreclosure documents if it applies to you, deed in lieu of foreclosure documents if it applies to you, short sale HUD settlement statement if it applies to you, child support payments if it applies to you, divorce decree if it applies to you, and other mortgage documents that pertains to your mortgage loan application process.  You will be assigned to a mortgage loan processor who will make sure that every information you stated on your mortgage application is correct and go over all the documents that you have sent is complete.  The mortgage loan processor will then submit your mortgage package to the underwriting department and a mortgage loan underwriter will start underwriting your mortgage application.  The underwriting process normally take two to three days where if everything goes well, a conditional mortgage loan approval will be issued and you will get clearance to order an appraisal on the property.  Up to this period, everything normally goes very smooth.  The conditions is what takes time.  The mortgage underwriter will condition items needed to get a clear to close.  A clear to close is when the mortgage lender is ready to fund the mortgage loan and a closing date can be scheduled.

Mortgage Conditions

Examples of mortgage conditions are updated paycheck stubs, update bank statements, verifcation of rent, verification of employment, letters of explanation for credit inquiries, letters of explanations for derogatory credit, letters of explanations for bankruptcy, foreclosure, deed in lieu of foreclosure, short sale, and other letter of explanations and supporting documents the mortgage loan underwriter requests.  Once all mortgage conditions have been met, the mortgage loan processor will submit to the mortgage loan underwriter.   The goal here is to get a clear to close once the mortgage loan underwriter has reviewed the conditions, however, there are cases where the mortgage loan underwriter will come back with additional mortgage conditions that has not been requested on the initial conditional mortgage loan approval and this is when delays in mortgage closings happens.  Everytime there are mortgage conditions requested by the mortgage loan underwriter, it will take anywhere between 24 to 48 hours and even sometimes longer for the mortgage loan underwriter to clear conditions.  There are times where you submit conditions where you can pick up the phone and speak to the mortgage loan underwriter and they can clear the conditions on the spot but many times, this is not the case.  It is very important that if you get a conditional mortgage loan approval that you submit all of the conditions that the mortgage loan underwriter is requesting to them all at the same time and hope no other condition request comes back from the mortgage loan underwriter.

TBD Property Mortgage Underwriting Process

TBD Property stands for To Be Determined PropertyTBD Property mortgage underwrites are when a mortgage lender is willing to process and underwrite your mortgage loan application without a real estate purchase contract and issue you a formal mortgage approval contingent on a real estate purchase contract and a appraisal.  TBD Property mortgage underwriting programs are not offered by all mortgage lenders and only a few mortgage lenders are willing to do TBD Property mortgage loans.  The TBD Property mortgage loan program is the same process as the traditional mortgage application and mortgage approval process discussed in the earlier paragraph but a subject property is not required. The great advantage of TBD Property mortgage underwrites is that the mortgage loan borrower will have their mortgage approval process started and completed most likely before they enter into a real estate purchase contract.  The TBD Property mortgage approval process is no different than the traditional mortgage approval process and when you get a conditional mortgage approval, we will be working with getting mortgage conditions back to the mortgage loan underwriter for a formal mortgage loan approval with a clear to close subject to a real estate purchase contract and a real estate appraisal.

Advantages Of TBD Property Mortgage Underwriting

The main advantage of TBD Property Mortgage Underwrites is that you get a jump start on processing and underwriting your mortgage loan application prior to entering into a real estate purchase contract and do not have to worry about a potential mortgage loan denial.  TBD Property Mortgage Underwrites are an excellent mortgage loan program for those mortgage loan borrowers who are self-employed and/or with prior bad credit or low credit scores as well as those with high debt to income ratios.  Many self-employed mortgage loan borrowers get their mortgage loan applications denied at the last minute because of massive income deductions and need to restructure their mortgage loan application by either paying down debt or adding a non-occupant co-borrower to their mortgage loan application.  If this is the case, it can become a major issue if the self employed mortgage loan borrower has a strict purchase deadline closing date to meet.  However, if this situation happens on a TBD Property mortgage underwrite, the time issue is not a big deal.  The same case scenario applies to mortgage loan borrowers with bad credit or low credit scores as well as those mortgage loan borrowers with high debt to income ratios.

Gustan Cho

www.gustancho.com

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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