When competing against other offers in an extremely low inventory market, most buyers are trying to increase their chances to entice the seller to accept their offer. While the most obvious (and powerful) is price, there are other factors that can increase your chances of entering escrow and closing on your next home. From the sellers perspective, a common concern is to accept an offer only for the buyer to cancel due to a issue. The less contingencies a buyer includes in their offer is perceived as a greater chance of closing in the seller’s mind. Contingencies are reasons for a buyer to cancel if they encounter issues. As it relates to the loan contingency, the obvious concern is waiving it and running into an issue during the loan process resulting in cancelling an escrow that could result in a loss of your earnest money deposit. There is a balance between writing a competitive offer and avoiding unnecessary risk.
The solution is to go through the underwriting process prior to starting your home search. Lender’s commonly refer to this process as “TBD Loan Approvals”, meaning a loan is underwritten without a property selected. A loan approval is issued with additional documents for the buyer to provide plus an appraisal and title report on the property once the buyer is in escrow. The primary functions are to have an accurate income calculation and credit reviewed by the underwriter. Outside of property issues the most common reasons a loan is unable to close is income related.
Of course this is an over-simplification, and a TBD Loan Approval may or may not be necessary based on your financials and the area you’re buying in. My goal is to provide you with strategies to increase your chances of closing on your next home. If you would like to discuss your finances and whether or not a fully underwritten approval is necessary, I can be reached at: (949) 238-6035. The consultation is free, and my #1 goal is to provide you with advice on products and strategies.