August 25th, 2020 12:11 PM by Jackie A. Graves
The loan approval process is indeed exactly that: a process. From the initial application submission all the way to the settlement table and beyond, there are many different steps that are taken. From the borrower’s point of view, however, things get pretty quiet after submitting the application and providing the needed documentation. It wouldn’t take much to imagine a loan file just sitting on someone’s desk waiting to be looked at. But that’s not what’s going on at all. There are different people working on different aspects of the submitted loan. An appraisal is ordered. Credit reports and credit scores are requested. Title insurance policies are generated.
Things get pretty quiet for the borrower during this time but in reality, the wheels are turning. Once the file is ready for a review, the completed loan package is delivered to the underwriter. The underwriter is the person making sure the submitted loan meets the guidelines established for the requested loan program. Generally, this mostly means the underwriter goes down the approval checklist and signing off on them one by one.
After about two weeks in and a bit of silence on the borrower’s end, a voicemail is left. The lender called and has a couple of questions. Uh oh. What now? What did they find? Is there something I don’t know about? Are they turning down my application?
For the uninitiated, this might cause a bit of consternation. But from the lender’s point of view, it’s perfectly common. When a loan is first submitted it is digitized (if is isn’t already) and electronically submitted through an Automated Underwriting System, or AUS. Within a few moments after the submission, a list of “findings” is sent back. These findings are sometimes referred to as loan conditions. For example, the findings ask for the most recent paycheck stubs covering a 30 day period. Or maybe some updated bank statements are being asked for. In general, and at this stage, the loan has essentially been preapproved and all that is needed is some follow up paperwork. Credit documents within the file need to be less than 30 days old. Most often these requests are simply to get the loan file in compliance with these findings.
The takeaway is essentially that once these findings are produced, the loan begins the documentation process. In other words, the borrowers and the lender know in advance whether or not the loan will make it to the settlement table. Because of the AUS findings, if there are some things that are amiss, they’re taken care of at the beginning of the process. The only time a loan does get a preapproval but is later derailed is due to some things discovered that wasn’t known at the time of application. But in general, most loans do in fact close with few if any problems.
But it’s the voicemail that the lender left that can bring a bit of pause. The trick to answer lender questions is very simple: answer them. At this point, the lender isn’t still deciding whether or not to approve your loan application but instead just filling in any paperwork gaps needed to get the closing papers to the settlement table. If there is a recent late payment showing up on a credit report, a lender might want an explanation letter. The response? Just describe what happened. Many times, the response is “I don’t know how that payment is showing a late” or some such response. There’s no need to get creative with a lender question, just answer and move on. In all likelihood, it’s a harmless request. So, pick up the phone and return the call.
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