A TBD (TO BE DETERMINED) C TERMINED) COMMITMENT LETTER
The first step in the lending origination process can be a pre- qualification letter, a pre-approval letter or a "To Be Determined" (TBD) commitment. Many real estate agents require a pre- approval letter or proof of funds before taking you on as a client. This assures them, and later assures the seller's agent and the seller, that you have the financial capacity to complete the deal. With the drafting of a pre-approval letter, the lender pulls credit from all three bureaus, receives the FICO scores, analyzes the debts, verifies the prospective buyer’s income, down payment amount and source, liquid reserves available after closing, and ensures that income tax returns have been filed if that is a requirement of a particular product. Often the pre-approval process includes running the application through desktop underwriting. This confirms that the profile of the borrower conforms to the basic requirements of a particular loan instrument. The pre-approval is an indicator that the borrower will be approved as long as their key information does not change before its time to close the loan. According to the Consumer Financial Protection Bureau (CFPB) “Prequalification and preapproval both refer to a letter from a lender that specifies how much the lender is willing to lend to you, up to a certain amount and based on certain assumptions. These letters provide useful information but are not guaranteed loan offers" (I.e. not a commitment to lend) "There’s not a lot of difference between a prequalification letter and a preapproval letter. While there are some legal distinctions, in practice both terms refer to a letter from a lender that says the lender is generally willing to lend to you, up to a certain amount and based on certain assumptions. This letter helps you to make an offer on a home, because it gives the seller confidence that you will be able to get financing to buy the home. It is not a
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