Like it or not when you apply for a mortgage you’re going to go through financial scrutiny. How well your financial picture is in order will determine an easy, slow or difficult process. Here’s what you need to know when your file is reviewed…
Mortgage underwriting in today’s environment is a very bureaucratic process. The job of the lender’s underwriter is to mitigate risk for the company and to make sure that the loan that they are signing off on will perform while adhering to financial guidelines. If guidelines are questionable or stretched, that can cause what’s called a buyback to the mortgage company. A buyback is a loan in which the investor forces the originating lender to purchase the loan back for a haircut- a significant hit to a company’s bottom line.
The who, how, what, when, where, why will need to be addressed on every single aspect of your financial picture before your lender signs off. Following is an example of the facts…
Previous derogatory credit event–this includes a previous short sale, bankruptcy or foreclosure, or deed in lieu. The underwriter will need:
Who: which people
How: house went back to bank in trustee’s sale
What: foreclosure for example
When: trustee sale date with deed
When: how long ago
Where: property location with specific address
How: payments were not made
By addressing the who, how, what, when, where, why on each aspect of your finances, you’re loan process will be far easier. If you’re missing a critical piece of documentation, that can cause a delay. If for example you were tied to another property, that you no longer own and there was another party involved, no matter how detailed or how complex, or how intricate a previous financial situation might be, it is absolutely critical address there questions on that event. Supporting documentation including not limited to any of the following could very easily help piece together your mortgage for a more successful outcome:
- Previous bankruptcy-papers all pages all schedules including the schedule of creditors
- Previous divorce all pages and schedules including the marital settlement agreement no matter how long ago you were divorced
- Tax payment plan documentation if applicable
- Detailed explanation on job gaps, nature of your employment, and an offer letter if applicable to a new job
- Bank statement all pages even if blank
- Gift funds- no blacked out bank statements, must show a clear donor ability to provide funds.
While all this might seem counterintuitive it is a byproduct of the bureaucratic mortgage loan process all lenders today face. A sharp loan officer who is skilled in these areas can quickly identify the challenges in your financial picture and specifically, give you exactly what you need to provide so you’re process is not only smooth, but fast as well.
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