Atlanta Real Estate Blog

What 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.

By Robert Whitfield
I wanted to take a moment to address the current economic situation and reassure you that your Atlanta area home is still one of the best investments you could have made or own during these troubled times.

I watch Squawk Box on CNBC every morning and always note the latest DJIA current and year to year stats. Just before this writing – stocks were down 38+ % from the same time last year! I am sure many peoples investment/retirement portfolio has lost even more. Except for certain California and Florida “bubble” markets, nowhere have home prices dropped nearly as badly as stocks. For example, per the latest Case-Shiller index, Atlanta prices are off only 10.8 percent over the same time last year. Since early ‘07 Forbes and Business Week have ranked Atlanta in the top 15 most stable US housing markets.

The market will come back as it always does and you can bet future home prices will only rise. Why do I and so many others think buying real estate is the best investment of all time? For many reasons – the worlds population keeps growing and people will always need somewhere to live. I have personally made and helped others make more profit in one transaction in a short amount of time than they ever could have in the stock market with the same amount of money and time span. In addition, as my grandfather used to say and as we’ve all heard “they aren’t making any more land” – thats true and one of the fundamental powers of real estate, but in the context of this article I am referring to “developed or improved land”. I dont recommend investing/speculating in raw land ever – unless you’re a developer, a population trend expert, visionary, or gambler with deep pockets! Why, because the hold time can be decades! Sure, I know someone who made a fortune selling land in and around the Perimeter Mall area 25 – 30 years ago but that land was in the family for half a century and the area was essentially a cow pasture then! I dont personally know too many other people who have done very well in land speculation. I do know plenty of people who have made money with single family homes and for the more sophisticated investor, multifamily apartment acquisitions.

Investors are absorbing great deals right now which is advantageous to themselves and the market as a whole. (Let me rant for a moment.) I get disgusted when certain media refers to investors as “vulture investors” – as if buying an already foreclosed home is doing a disservice to the family who used to own it! If investors don’t “take advantage”, many markets will remain so flooded with deteriorating bank REO assets (foreclosures) that it will take much longer for thier housing markets to stabilize. Someone should ask these reporters, “Would you rather see a foreclosed home on your own street become a vacant (often vandalized) REO home – a neighborhood eyesore that only drives down prices the longer it is vacant, or be purchased ASAP by someone who will fix it up, rent it to a deserving family and sell it for the highest possible price when the time is right – thereby maintaining or even raising neighborhood values?” The answer is obvoius when you frame it in reality – investors play an important role in bringing this housing market back to some kind of equalibrium – and in my opinion, we should be thankful they have the money, intestinal fortitude, and vision to do what they do.

Couple all of the historical and forward looking benefits of owning real estate with some of the current advertised and unadvertised deals available, the cheap mortgage money, and our up to $10,000 Cash Reward and a reasonably well planned real estate transaction can be a great opportunity.

The Economic Downturn is a Huge Plus for investors, first time buyers, and even move-up buyers needing a larger home. Move up buyers? Yes, as an Atlanta area seller you will not get as much for your home as in ‘06/’07, but you can more than make up the difference when you buy, and if your credit is good, mortgage rates are really outstanding. Investors, you need a buy and hold strategy; flipping is tough unless you’re a pro at certian market segments or wholesale deals to other investors. Buyers, get with your lender before you even think about looking – rates are great but qualifying is harder – it’s a good idea to make sure you can get a loan! I have seen to my surprise a few deals not be approved or not be viable because of extra underwriter requirements this year (not subprime either) that would have been a slam dunk in 06 and even the first half of 07. One involved credit scores in the high 700’s, the other was a Physician making over $800K a year. Exceptional deals are there IF you have cash or can get a mortgage. This market will be looked back upon by buyers and investors who are making shrewd acquisitions now and in the comming months, as one of the golden opportunities of a lifetime!

WASHINGTON – Credit squeeze, credit freeze, credit system seizures: Everybody knows how severe and painful the global financial breakdown has been – with banks unwilling to lend even to other banks.

But what about mortgages and real estate? Can you still get a home loan with less than a 20 percent or 30 percent down payment? Or with a credit score below 720?
Absolutely. It would be a big stretch to label housing the sunny side of the market at the moment, but there’s a lot more light there than in most other financial sectors. Consider these facts:

• There is no shortage of money available for home mortgages, no freezing of credit to purchase or refinance a house. Why? Because the American mortgage market has been federalized – at least for the time being. More than 90 percent of new loans now are being made through FHA, the Federal Housing Administration insurance program, plus Fannie Mae and Freddie Mac. FHA is owned by the federal government, and Fannie and Freddie are operating under federal conservatorship. All three have unfettered access to global capital markets at rock-bottom costs because their borrowings are fully guaranteed by the Treasury.

• Loan terms and credit underwriting standards have been toughened up, but you can still put down 3 percent (3.5 percent after Jan. 1) on an FHA-insured mortgage and 5 percent on certain Fannie Mae and Freddie Mac loan programs with private mortgage insurance. FHA’s credit standards are generous and forgiving – the agency exists to help people with less-than-spotless credit histories. Fannie Mae and Freddie Mac have raised their credit score requirements over the past year, but buyers and refinancers with scores in the upper 600s can still qualify for loans carrying reasonable rates and fees.

• Despite the global financial system’s quakes, mortgage rates not only remain low by historical standards, but for the week ended October 30, 2008 while 30 year fixed rates ticked up to 6.46% from 6.04% a week earlier – that is still among the lowest rates for a 30 year mortgage in the last 25 years!

• Maximum “jumbo” loan amounts through FHA, Fannie and Freddie in high-cost local markets on the West and East coasts continue to be $729,750 through December. In January, the high-cost maximum is projected to dip to approximately $625,000.

• Home prices – pushed by foreclosures and short sales – have rolled back to 2003 and 2004 levels or lower in many of the former boom markets. As a result, growing numbers of buyers are coming off the sidelines, making offers and writing contracts. The pending home sales index jumped by 7.4 percent based on purchase contracts signed in August, according to the National Association of Realtors. The heaviest increases – pointing to higher closed sales in the coming two to three months – were in California, Florida, Nevada and the Washington, D.C., metropolitan area.

Housing and mortgage leaders say consumer worries about the stock market have obscured positive developments under way in real estate, where pricing pain and downsizing have been facts of the life for the past two and a half years.

David G. Kittle, president and CEO of Principle Wholesale Lending Inc. and incoming chairman of the Mortgage Bankers Association, says “the mortgage market has never shut down” despite the global financial crisis. Money is “clearly available as long as you can qualify for it” with at least a modest down payment and decent credit history.

On the front lines, mortgage company owner Jeff Lipes, president of Family Choice Mortgage near Hartford, Conn., says “I don’t think consumers really know how free-flowing capital is right now in the residential mortgage market. There are no shortages, no breakdowns. People ought to be aware of that.”

Bottom line: Scary as the news has been about stocks and banks, this is not the case for mortgages. Besides shopping at large national lenders, check in with local banks and credit unions who may be originating loans for their own portfolios – not for Fannie, Freddie or FHA. Many of them are healthy, have plenty of cash to lend, and may be surprisingly competitive on terms and rates compared with the big boys.

Contact Robert Whitfield at Advantage Realtors if you need a good source for home equity lines – we have a local North Atlanta lender with more relaxed underwriting guidelines and better rates than the big national banks.