13th February 2014

TBD Loan Approvals

Loan Pre ApprovalWhat is a TBD Approval? Why is it the way to go?
TBD (To Be Determined) approvals are for buyers obtaining financing who get their loan file underwritten to the furthest extent possible – without having yet identified a property to purchase. With a TBD, income, assets, credit, etc are examined leaving only the property itself to be determined. Once the purchase contract is created, the remaining needed items to fund the loan are minimal – an appraisal and title report.

Only a Bank, Credit Union or Direct Lender has this capability because they have “in-house” underwriters. The only remaining items for a “Clear-to-Close is a copy of the borrower’s purchase agreement and an appraisal on the property.

Who do they benefit? Everyone Involved.

Real estate agents know they have a solid buyer before going out looking at homes and writing up offers. A deal falling out because of a pay stub or a strange deposit on a bank statement 20 days into escrow is a huge time waste and emotional drain.

Buyers have more confidence with their offers knowing that they ‘check out’ with the underwriter before pulling out the credit card for an appraisal. More importantly – sellers have been known to accept a lower offer from a buyer who has a “Loan Approval Subject Only to Appraisal and Title”, versus a buyer who has only been pre-qualified.

Sellers have less fall out when dealing with a TBD approved buyer. If there is fallout, it would be because of the property that they are selling, not the buyer. Sellers hold TBD approved buyers in esteem somewhere between buyers who only have a ‘standard pre-qual’ and the highly coveted ‘all-cash’ buyer. There are times when sellers will actually accept lower offers from an “approved buyer” because they want or need  a firm sale date, and prefer not to risk letting a buyer who merely has a Pre-Qualification pull their property off market for 15+ days while they seek loan approval.

With a TBD Approval a lot of potential unknowns are eliminated up front, and all parties involved benefit.

This entry was posted on Thursday, February 13th, 2014 at 7:34 pm and is filed under Home Buyers, Mortgages, New Posts. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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