Mortgage loan financing is a little bit of a cryptic process to some people. Talk to your friend your neighbor your parent and everyone will have their story about what their individual loan process was some good, some bad and some in between. Here is the nature of mortgage lending and how the process works so you can best position yourself for successfully purchasing or refinancing a home….
To secure mortgage loan financing you need to provide an ample supply of your cash credit and income as well as to provide supporting documentation to back up your credit, your cash, and the income. Remember mortgage loan financing is secured against your ability to repay. In order to demonstrate that you can afford the mortgage you must possess a blend of all three. So initially the lender will qualify you and ask for supporting financial documentation and then the loan gets reviewed. The person that makes the actual review on the mortgage is the underwriter. This is the unicorn in the mortgage industry. The underwriter says whether your loan is going to go through and they’re the ones that hold all the keys so to speak for you to purchase your home.
The underwriter thoroughly examines each piece of documentation that you provide and if there’s any questions they will come back and add prior to doc conditions on the loan. So your loan will come out of underwriting in one of three ways approved with conditions which simply means you have a commitment to lend so long as you provide X Y and Z paper trailing and or documentation for example, suspended which means there’s an inherent issue on your file that needs to get clarified in order for the underwriter to approve the loan or the loan will be denied. Most of the time loans are not denied they are approved provided that your loan officer did their homework.
You need to provide the documents that the lender requests and then they will send the file back to underwriting for the underwriter to review. Sometimes the conditions that you provide might create more conditions and you must keep going back and forth with providing documents until all conditions are satisfied and the loan gets a clear to close. These are the three magic words that you want to hear which insures doc are being drawn for you to sign, fund and close.
Here’s where things can become problematic…
Let’s say you have a debt to income ratio problem which is the most common issue in underwriting and that means that the monthly debts that you have is more than 50% of your income for example this will vary, but we’re using illustrative purposes here. How to fix this? Put more money down, pay off debt, change the loan program, add a cosigner.
Another issue in underwriting can arise when you cannot provide the condition the bank asks for. This is potentially problematic because it’s non-negotiable the bank ex asks for x and you need to provide X not Y and not Z.
Lastly the thing that can make things problematic as providing the same piece of documentation multiple times in the process this is the inherent nature of mortgage lending and unfortunately this is very common. The loan officer you’re working with should explain this to you at the beginning of the process. Those same 30 days of pay stubs you provided you guessed it they’re going to want it again later. Just anticipate and expect this because it’s normal.
Being resistant or unwilling to provide the documents that the lender needs in a timely manner can result in a late close of escrow which subsequently can create more stress especially if it’s in a purchase transaction and you are accountable contractually to certain dates.
The number one thing you want to do in the mortgage process is communicate and surrender to the process. It’s the only way that you’ll get in and out of underwriting and through the loan process in a quick efficient way.
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