Increase your chance of coming out on top of the next bidding war with the Simplicity Mortgage Competitive as Cash TBD loan approval!
The current housing market is hot and homes are selling fast. As soon as a property hits the MLS, there can be multiple offers. Many times, sellers think cash is king when it comes to the ideal buyer or selecting the winning offer. Cash buyers have the freedom to purchase the property for whatever price is negotiated. They can make the purchase regardless of income history or future income, financial reserves, financial history, or any variety of potential issues with the property. Many sellers don't realize they do not need to accept a lower purchase amount to ensure a quick and successful closing.
Financing a home is more involved. Lenders do a great deal of analysis regarding the buyer and property. They review items to include identification, bank statements, income, debts, financial history, tax returns, and more (depending on the loan type and amount). This provides assurance the purchase of the property is equitable for the buyer. There are different levels of mortgage approval analysis. When this is completed in a proactive and detailed manner, the transaction can close just as easily from the seller's perspective.
Pre-Qualification --> Pre-Approval --> TBD Underwriting Approval
Pre-qualification vs. pre-approval can be confusing for borrowers, sellers and perhaps, unfortunately, some real estate professionals. Think of each of these categories as building on the prior. As more information and documentation is provided, the level of confidence the information and the lender's ability to finance the loan increases.
Pre-qualification is the initial step in the loan application process. It is not optimal nor frequent in today's market. It involves discussing your basic financial situation with the mortgage professional to determine an approximate amount a lender would be able to lend the borrower(s). It is rough first step that allows the buyer to know their price range, but does not require or involve any documents or proof of the information used to make that assessment.
Pre-approval goes a few steps further than pre-qualification. Documentation must be provided to support the financial information shared so that it can be analyzed and evaluated. An application is submitted and credit is pulled to verify that the lender has a complete picture of the borrower's finances. The mortgage broker will then provide the buyer with an pre-approval letter, typically on company letter head. This is submitted with the offer contract. Multiple letters can be provided for different price points lower than the approved max loan amount. The buyer and Realtor work with the mortgage broker to update the approval letter to protect the buyer's negotiation ability.
The pre-approval letter is generally the document that gives Realtors, buyers, and sellers confidence the financing is solid. However, not all pre-approvals are created equal. The document may share the same title, but different mortgage companies or loan officers may not do as thorough an analysis as others. This may seem easier initially, granting your a higher loan amount or not finding something that is an issue - but in the long run, can cost you.
As a buyer, you want your pre-approval to be as iron clad as possible. If the financing fails later into the purchase contract date, a potential buyer may have invested money into the process that cannot be refunded. There is usually an inspection and appraisal, which is paid for by the buyer. Worst case scenario is a buyer having to forfeit their earnest money deposit if the financing contingency window expires. And in reality, it simply wastes time and energy for the buyer, seller, and Realtor - which is one of the reasons sellers are more likely to select a cash offer.
TBD Underwriting Approval
TBD Underwriting Approval takes pre-approval to the next level and is considered a true commitment to lend. The broker conducts a pre-approval, but a TBD approval comes after the documentation is reviewed by the lender's underwriter. It is essentially a loan approval, only without the property details.
The TBD approval process requires all information be submitted to the underwriter other than the property address. The underwriter completes a thorough review of the information provided to include any collections, judgements, disputes, bankruptcies, back taxes, and more that could cause delays later in the loan process. If additional documentation is needed, this can be collected from the buyer and provided at that time. With a TBD approval, the lender and underwriter have the opportunity to rectify any conditions with the buyer prior to submitting their offer. The lender is then able to document that the buyer has underwriting approval which is provided to the buyer as a TBD loan approval. This conveys the highest level of confidence of a buyer's ability to purchase. You can then submit your offer along with the TBD underwriter approval. If the property is approved, the loan can close as quickly and simply as a cash deal.
As with any loan approval, there are a few things you want to avoid during the loan process:
Don't take out new debt, make any large purchases, or move significant sums of money
Maintain your current employment/income
Set aside the assets or savings that were used to approve your loan
Get Competitive! Bid to Win on your Dream Home
If cash buyers and bidding wars have been hindering your home hunt - we can help! Simplicity Mortgage is locally well known for our ability to close purchases quickly and successfully. We have provide iron clad pre-approvals and are excited to introduce an additional level of financing certainty to our client's home purchase negotiation tool kit of TBD loan approvals. In today's market, cash isn't always king!
We look forward to helping you make the home you love a reality. Call 386-401-9000 to begin the process and be ready to conquer your real estate goals!
Simplicity Mortgage is a mortgage brokerage located in Port Orange, Florida.
The office is at 870 Dunlawton Avenue, Suite 309. Simplicity Mortgage has a portfolio of over 15 nationwide lenders, allowing us to provide a large variety of excellent loan options to our clients.
Conventional, VA, FHA, USDA, condo, jumbo, interest only, bank statement, no income, asset only, W-2, 1099, self-employed, small business, investment, cash flow, reverse mortgage, and more.
If you need a mortgage broker with local expertise, a plethora of unique loan products, and exceptional customer service, call Simplicity Mortgage today!