A fast home mortgage loan approval is the focal point of actually getting the loan to close escrow.
The home mortgage loan approval is the point in the transaction gives everybody the green light to move forward with obtaining conditions and ordering docs. The best way to get the loan approved as quickly as possible is to make absolutely certain everything is taken care of upfront. Watch out for another approval.Our credit markets are still very tight and as a result, mortgage underwriting is ever more prone to scrutiny than before. If there is the slightest little error on a file it must be corrected or explained or paper trailed before the loan will be allowed to fund. Traditionally, mortgage lenders upon getting mortgage loan approval, have sets of loan conditions some are borrower needed and others are escrow and realtor needed. There two sets of categories; these are prior to doc conditions and then there are what are called prior to funding conditions. What lenders aims to accomplish is to have all prior to dock conditions in which is where they have the borrower traditionally send in whatever is needed by the underwriter. These conditions are then signed off and prior to funding conditions are taken care of after the borrower signs final loan documents.
Having prior to doc conditions in upfront will ensure a fast home mortgage loan approval.
What are we talking about here? We are talking about having a complete file upfront from our client. This means you will need the following items: two years of tax returns, and W-2s for the last two years, most recent paystubs for the last 30 days, two months bank statements for reserves, last two months quarter’s statements of retirement accounts/investment accounts if that is being used for reserves or for the down payment, bank account print out to show money going into escrow, cancelled escrow deposit check both the front and the back, if self-employed last two years of tax returns are needed, as well as a year-to-date profit and loss statement and CPA letter verifying two years of self-employment or a business license.
These are the items that are most commonly needed for refinance loan for purchase loan for a borrower seeking a fast home mortgage loan approval. Here is a common red flag list most lenders and underwriters won’t tell you:
1. Large cash deposits into a bank account -The lender will need letter of explanation detailing the deposits and might also need a paper trail with bank statements and/or documentation to prove cash deposits are legitimate, otherwise these monies can not be used for the down payment or reserves.
2. Actual balance versus available balance-mortgage lenders will only go off of the available balance which means if you deposit money into a bank account, we will only be able to use the actual balance once those funds are available. Additionally, if there is somebody else on that bank account was not going to be on the mortgage, you will need a letter from that individual saying the borrower has 100% access to those funds.
3. Gift Funds-These must be from a blood relative and the giftor needs to provide a bank statements showing he or she has the ability to gift the money for the transaction. The Giftor can simply wire the money into escrow, they do not need to have it hit the main borrower’s bank account.
4. Down Payment Funds-if these monies are coming from the borrowers’ own money and not in the form of a gift, this money needs to be paper trailed and/or sourced, as there is usually a two month seasoning requirement for use of that money.
5. Bankruptcy, Short Sale Or Foreclosure-to get a mortgage today, a borrower’s previous bankruptcy must have been two years ago or longer (exceptions can be made on a case-by-case basis), a previous short sale or foreclosure is an automatic three years from the date being reported on the credit report, same goes for bankruptcy lenders go by that date shown on the credit report.
6. Bankruptcy Debt-all debts that are charged off in bankruptcy whether that be Chapter 7 or Chapter 13 must be satisfied and/or released or discharged. If there is an item on a credit report that gives any indication any debt is still outstanding, documentation will need to be provided to show that it in fact is released.
7. Tax liens-if there is anything on credit report that indicates that debt is filed, but not released the full amount of the tax balance will need to be paid upfront or documentation will need to be provided from the county or state showing that that is in fact paid in full.
8. Accounts in dispute-any credit card, auto loan, or any other form of account that is in dispute and reports that way on a credit report will need to be corrected, ie taken out of dispute status (exception basis might apply).
9. Student Loan delinquencies-(for FHA Loans) there can be no student loan delinquencies within the last 12 months and if there is, it will be up to the underwriters discretion to approve the loan or not. Simply make your student loan payment on time or work with your loan officer to get your credit report corrected.
10. Undisclosed child support or alimony obligations-these will always show up on income tax returns or if there is a judgment or garnishment involved, it could show up on the pay stubs, these must be accounted for in the debt to income ratios when qualifying for a house.
11. Income Tax Return Extension-if there is income tax return extension filed we will need the actual extension provided from IRS, and if there is any money that is owed you will need that full amount of money to be paid in full, a payment plan will not work.
12. Losses on income tax returns-these losses must be factored into the debt to income ratios against the gross monthly qualifiable income. These losses can be business losses, real estate losses etc. 2106 business expenses also fall into this area and will be used against the gross qualifiable income.
13. Pay taxes on your money-this is where self-employed folks tend to have a more difficult time obtaining financing. If you are self-employed and you are thinking about getting a mortgage loan, don’t take so many write offs, pay your income taxes on that money because that money will be used to help you qualify for a mortgage. For most self-employed borrowers lenders will go directly to the Schedule C. of the federal income tax returns the last two years and go to the net profit and loss amount reported, then add back expenses to those numbers and then divide that number by 24 in order to compute income.
14. Rental delinquency-having a late on a rent payment in the last 12 months and try to purchase a house is akin to having a mortgage late. It is a big deal and it needs to be corrected upfront. So if you know that you had a late for whatever reason, go make good with the landlord or property management company because a clean verification of rent will be acquired to get a mortgage.
15. Address mismatches-if there are different addresses on pay stubs, tax returns or even w2, this needs to be handled with letters of explanation upfront.
Be smart, ask questions, provide all financial documentation and you will be on your way to attaining a fast home mortgage loan approval!
This could not be more true. Be prepared to over document everything. Letters of explanation can be handled right up front which takes care of the majority of underwriting curiosity. If any of the above 15 items pertain to your financial situation make absolutely sure you go over this with your local mortgage lender or mortgage broker as soon as possible. A mortgage is an extremely important financial decision that needs to be handled in the right way.
By handling these items up front not only can you get your loan approved very quickly, but you can put yourself in the position of being able to close escrow on time as well as locking in the most favorable interest rate possible which for the next 30 years could easily save you thousands of dollars. Make no mistake getting a fast home mortgage loan approved quickly will be somewhat unpleasant as far as documentation gathering, but the rewards are well worth the effort on the front end.
Scott Sheldon is a local mortgage loan officer who can help you get a home mortgage loan approved fast.