November 26th, 2018 8:45 AM by Jackie A. Graves, President
What to Expect and
How Long It Takes
On the fun scale, the mortgage underwriting approval process
often feels like an exceptionally long dental
appointment. You've dutifully gathered the mountain of documentation
required to obtain a mortgage... or so
You'll either hand them over to your loan officer or you’ll give them to an
assistant or a processor. Either way, your documents will be reviewed for
thoroughness, completeness, and accuracy, and almost everyone messes something
up. They forget something or miss a signature. Your missing documents or
signatures will be requested along with clarification on anything that's not
crystal clear about your docs.
And so it begins.
You’ll probably be
quizzed right off the bat about any large deposits in your checking or saving accounts or
how your 401k is
vested, at least if you're planning on making a down payment of less than 20 percent. This
is standard so roll with it, but hustle with your answers and any additional
documentation. It's absolutely needed for the next step: underwriting.
The next step in the
much-ballyhooed “underwriting process” can vary a great deal depending on your
loan officer and your choice of a lender. The mortgage lender and loan officer
you choose, the type of loan you need, and the general level of detail you've
put into gathering your documents will play a large part in determining
your personal level of “underwriting discomfort".
Your file will be passed
on to a corporate mortgage processor in a centralized location that is
typically nowhere near you, at least if you went with a big bank. These
processors are typically overworked and underpaid so you can expect a more
lengthy approval process. They try to maximize a number of loan files that
everyone has to process/underwrite—it's a quantity-over-quality approach.
Smaller lenders and independent mortgage brokers usually staff cohesive
in-house teams. This results in more efficient operations and everyone is under
There are many good
reasons to use a big bank and some of them are valid. They can generally afford
to take more chances than the little guy, and that's great if you find yourself
in a gray zone for approval. They also typically offer a wider variety of niche
mortgage products for things like renovation and construction financing. But
you'll have to give up a little something in the way of efficiency in exchange
for these advantages.
All mortgage lenders have
a “turn time", the time from submission to underwriter review and the
lender's decision. The turn time can be affected by a number of factors
big and small. Internal policy on how many loans operations the staff carries
at one time is often the biggest factor, but things as simple as weather
conditions—think Rochester, NY in the winter—can throw lender turn times off
Ask your loan officer
what she expects your turn time will be and consider that factor in your
ultimate choice of a lender. Keep in mind that purchase turn times should
always be less than refinance turn times. Homebuyers have hard deadlines they
must meet so they get underwriting dibs.
application should be underwritten within 72 hours of underwriting submission
under normal circumstances and within one week after you provide your fully
completed documentation to your loan officer.
The underwriter will
typically issue one of three dispositions to your application: approved,
denied, or suspended.
If it's approved,
underwriting will typically assign conditions you'll have to meet for full
approval. This might be clarification regarding a late payment, a large
deposit, or a past life transgression. It could simply be a missed signature
here or there.
If it's suspended—which
is not completely unusual—the issue of underwriting becomes more confused and
needs clarification. These delays are typically employment- or income-related,
but occasionally an asset verification question can also lead to a suspension.
In this case, you’ll get two conditions: one to clear the suspense and the
standard conditions needed for full approval.
Finally, you'll want to
find out exactly why if you're denied. Not all loans that start as denials end
up that way. Many times a denial just requires you to rethink your loan product
or your down payment. You might have to clear up a mistake in your application
or on your credit report.
The status of the vast
majority of loan applications is "approved with conditions". This is
referred to as "conditional approval". The underwriter simply wants
clarification and additional docs, mostly to protect himself and his employer.
He wants the closed loan to be as sound and risk-free as possible.
Quite frequently, the
additional items aren't requested to convince the underwriter but rather to
make sure the mortgage meets all the standards required by potential secondary
investors who might end up buying the closed loan when everything is said and
Your primary job during
the time your loan is in underwriting is to move quickly on document requests,
questions, and anything else that's asked of you. No matter how ridiculous you
think the doc request might be, set that hoop aflame and jump through it
as quickly as possible.
Do not take
the inquisition personally. This is just underwriting does. Just handle the
last few items and submit them so that you can hear the three best words in
real estate—"clear to close"!
You're done. There will be only a few more routine
hoops to jump through. Cut your down payment check, sign on the dotted line,
and get ready to move.
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