What Can You Do To Make The Process Easier And Faster
Things that slow down the process are either a lack of promptness from the buyer or a lack of communication from the lender on whats needed, Lerner says.
- Gather necessary paperwork. Start gathering bank statements, tax forms, and pay stubs during the house hunt for a truly expedited process. Respond promptly when your loan officer requests additional information for the underwriter.
- Confirm what systems your lenders will use to assess your application. You can ask your lender if it uses online systems to automatically verify your employment and assets, according to Matt Hackett, operations manager at Equity Now, based in New York City. If someone is technologically savvy, its easy to go on the lenders portal, he says. With authorization, we can order reports that oftentimes take the place of income documentation like pay stubs and W-2s.
- Keep in contact with your loan officer. Hackett also recommends keeping an open line of communication with your loan officer about employment, especially in the current economic environment. Lenders now check your job to see if its considered an essential service. If its not, they may do more frequent checks throughout underwriting to make sure you havent been furloughed or laid off.
As a home buyer, youre required to report a status change to your employment, Hackett says. But its easier if people are transparent and up front if they have any relevant information plus they feel more control of the process.
What Is Clear To Close
“Clear to Close” means the Underwriter has signed-off on all documents and issued a final approval. You meet all of your lenders requirements to qualify for a mortgage, and your mortgage team has been given the green light to move forward with your home loan.
When you reach this stage of the mortgage process, your lender will send you a clear to close letter along with a copy of the Closing Disclosure . The CD is the standardized document that details the finalized terms for the loan, including a breakdown of all closing costs and fees. You wont receive the Closing Disclosure until youve been cleared to close.
Youre in the home stretch now, but theres still work to be done behind the scenes: The lender will schedule your closing and review the CD to ensure every cost and contingency has been incorporated before heading to the closing table.
Don’t Make Any Big Financial Moves During The Underwriting Process
If possible, hold off on doing anything that will change your financial picture before underwriting is finished. If you take out a huge car loan, for instance, this could affect your credit score and debt-to-income ratio. That means the underwriter will need to get all this new information before deciding whether to give you a mortgage.
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Prepare All Your Documents Ahead Of Time
Your lender will require certain documents for your underwriter. Having them on hand from the get-go will make underwriting easier for everyone. Here are the documents you’ll probably need:
- Identification and social security number
- Pay stubs from the last 30 days
- Tax forms and returns from the last two years
- Proof of any other assets or sources of income
- Official information about any debts
Mistakes To Avoid During The Underwriting Process:
- Applying for new credit accounts. New credit applications and approvals can affect your DTI and change your credit score, which can impact your mortgage application.
- Leaving a job. It could make things more complicated if you lose your job during the homebuying process. If possible, wait until the mortgage process is complete before making any career changes.
- Hiding financial information. If the lender finds significant financial information you’ve hidden or failed to disclose, it can delay the underwriting process or cause a denial.
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Want An Expert In Your Corner
Think Plutus will go over your application with a fine-toothed comb and inform the lender of any special circumstances in your application. We also have access to the full market of mortgage providers and products, so we can place your mortgage application with the most suitable lender. With Think Plutus in your corner, you give yourself the best possible chances of success. Get in touch today.
What Is A Mortgage Underwriter And Why Does A Mortgage Application Go To An Underwriter
A mortgage underwriter works for a mortgage lender.
In mortgage underwriting you can imagine with Â£100,000s involved, the risk can get high, really quickly, so the process can be firm and lengthy.
Your income, affordability, debts, credit profile and property will all be assessed before you get your mortgage approval â and it’s the underwriter’s job to do this.
Once the mortgage underwriter has given your application an approval, you’re pretty much home and dry: a mortgage offer’s almost certainly on the way, but if your circumstances do change between the offer and completion, the lender does reserve the right to decline your request for funds.
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What Does An Underwriter Do
A mortgage loan underwriter is the person in charge of making the final call on your mortgage approval. They evaluate all of the documentation associated with your application and help the lender determine if youre qualified for a loan. That includes pulling your credit reports, ordering a home appraisal, verifying your income, employment and assets and double-checking the source of your down payment funds.
If there are any questions or additional information needed, the underwriter will work with you and your lender to collect everything to make a final decision.
How Long Does Underwriting Take
Mortgage lenders have different turn times the time it takes from your loan being submitted for underwriting review to the final decision.
The full mortgage loan process often takes between 30 and 45 days from underwriting to closing. But turn times can be impacted by a number of different factors, like:
- Internal staffing policies
- Loan application volume
- The complexity of your loan profile
Depending on these factors, mortgage underwriting can take a day or two, or it can take weeks.
Under normal circumstances, initial underwriting approval happens within 72 hours of submitting your full loan file.
In extreme scenarios, this process could take as long as a month. However, its unlikely to take so long unless you have an exceptionally complicated loan file.
When youre shopping for a mortgage, ask lenders how long its currently taking them to close on a home purchase or refinance .
In addition to shopping interest rates and closing costs, turn times should be one of the final factors in your ultimate choice of a lender.
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What Is An Underwriter What Do They Do
Underwriters determine an applicant’s creditworthiness and ability to pay back the mortgage over a loan’s lifetime.
There are two types of underwriters: manual, handled by a real person, and automatic, which is managed by software. In both cases, your delinquency risk is assessed by reviewing your financial information and credit history. Automatic underwriting uses an artificial intelligence-driven computer program to determine your delinquency risk.
Although automated underwriting is faster, it’s less flexible than manual underwriting. A manual underwriter can better account for inconsistent income or an error on a credit report. Some lenders use a combination of manual and automated underwriting to streamline this process.
Who pays for underwriting varies among lenders, but in most cases, the borrower is responsible for paying the underwriting costs during the closing process.
The Determination: 1 To 3 Days
The last step is the approval process. Once the underwriter has all the information requested, they will approve or deny the loan, or they may approve the loan with conditions.
Conditional approval is when the underwriter says you are approved for a loan for $500,000, but the condition is that they need to see ABC documentation from you, Helali explains. For instance, if you say you have a gift coming from mom or dad for $20,000 to help with the down payment, but you dont have it yet, we may take your word for it for now but your approval is only valid if you can provide the proof of having it in hand before the closing.
Helali says other conditions may include a requirement that you pay off a certain debt, or that you sell your current home.
If for any reason you cannot fulfill the conditions or you cannot provide the documentation the lender is asking for, it is crucial for you to meet as soon as possible with your lender to see if there are other remedies that will keep you in the game, Helali advises.
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How To Improve Your Underwriting Experience
When you apply for a mortgage, you want the underwriting process to go as smoothly as possible. To improve your experience, follow these simple tips:
- Review your finances: Add up your monthly debts and proposed housing expenses and divide it by your gross monthly income to calculate your DTI. Then get a free credit report to check your credit score. Then see how much you need for a down payment so you can avoid paying PMI.
- Get prequalified: Talk with your lender about getting prequalified for a mortgage up to a certain amount. A prequalification helps you know how much you can afford and whether your finances are on the right track.
- Respond quickly: The underwriting process often involves a lot of paperwork. You can expect your lender to contact you for more information at least once. Be prepared to provide or locate documents quickly to avoid delays.
After reading this guide, you may have specific questions about your underwriting process. Contact your Home Lending Advisor to get answers to your questions online, over the phone or in person. Your Home Lending Advisor can even offer suggestions to improve your financial picture to help you qualify for a mortgage.
Income Verification And Documents
Your lender will want to verify your employment and income. For that purpose, they may ask to see your tax returns or bank statements.
Once youve been pre-approved, your lender will issue you a pre-approval letter with the amount theyre willing to loan you included. This letter will convey to potential sellers that youre serious about buying a home and that you can secure the financing for it.
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What Checks Are Involved In Mortgage Underwriting
- Lender policy – requirements you need to meet re. age, legal status, loan-to-values, deposit, credit history, etc.
- Affordability – usually a combination of income multiple and borrower-specific affordability calculations.
- Property – to check for defective or high-risk properties, construction methods or materials against the lenders criteria.
- Fraud and money laundering – to pinpoint where your money has come from and clarify any anomalies.
What’s The Result Of The Underwriting
Once the review is complete, the underwriter will issue a written decision. This may be one of the following:
Approved . Everything on file conforms to the lender’s guidelines and external guidelines such as Fannie, VA or FHA. The loan is “cleared for closing” which means you’ve passed the underwriting stage of the loan. This is the ideal outcome from the borrower’s perspective.
Conditional approval . The underwriter needs additional information before he can approve the loan. For example, the underwriter may request a letter from your bank to explain an unusual bank transaction. If your application is conditionally approved, you’re going to have to do some homework in order to resolve the issue. Once you have provided the explanation, the underwriter will clear the loan for closing , give you some more conditions to satisfy or reject your application .
Denied . Something on file does not conform to guidelines. At this point, you’re going to have to apply for a loan elsewhere or address the reason for the rejection.
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Loan Is Submitted To Underwriting
The Underwriter begins the loan underwriting process, reviewing all documentation to determine whether you qualify for a mortgage.
While the Loan Officer and Mortgage Consultant will do their best to submit a complete file during loan underwriting, an Underwriter may still have questions and/or require additional documentation to satisfy any conditions for a final approval.
In addition to the loan file submitted by processing, the Underwriter examines:
- The completed appraisal
- Other ancillary documentation pertinent to the loan
If the loan is approved, the borrower receives a list of conditions required to be met before receiving final approval and notification of Clear to Close.
Next step: The Loan Coordinator provides you with underwriting’s preliminary decision on the loan.
What Does A Mortgage Underwriter Do
A mortgage underwriters job is to assess delinquency risk, meaning the overall risk that you will not be able to repay the mortgage. To do so, the underwriter evaluates factors that help the lender understand your financial situation, including:
- Your credit report
- The property you intend to buy
The underwriter then documents their assessments and weighs various elements of your loan application as a whole to decide whether the risk level is acceptable.
Heres an example from Fannie Maes underwriting guidelines. For a single-family home thats to serve as a primary residence, assume the lender typically requires the following:
- Maximum debt-to-income ratio of 36 percent
If a borrower falls short in one area, the loan might still be approved based on the strength of the other two factors, and/or factors such as:
- Whether you will occupy the property
- Amortization schedule
- Type of property and how many units it has
- Financial reserves or assets
So, if you had a higher DTI say 40 percent you might get approved for a mortgage as long as you have a better credit score. If your LTV ratio was lower than 97 percent, you might be able to get mortgage approval even with a lower credit score, like 620.
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How Long Does Mortgage Underwriting Take
Each situation is different, but underwriting can take anywhere from a few days to several weeks. Missing signatures or documents, and issues with the appraisal or title insurance are some of the things that can hold up the process. Be very responsive to requests for information, and if you need more time to gather requested documents, continue to communicate status with your mortgage loan officer.
What Can I Do To Speed Up The Mortgage Underwriting Process
Although theres not much you can do about a clogged mortgage application pipeline, there are steps you can take to ensure that when your number does come up, the underwriter can move quickly on your application.
Helali says the first step is to do some research online and play with mortgage calculators to get an idea of what you can afford.
Getting pre-qualified is very important because you want to make sure that youre looking in the right price range, he says.
You can also shop around for a lender that does pre-underwriting, where the lender takes care of some of the heavy lifting before you even start shopping for a house.
Most importantly, make sure that you have compiled and submitted every document that the underwriter has requested.
And finally, stay in touch! If your real estate agent or lender reaches out to you for additional information, respond promptly.
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Guidelines On Mortgage Underwriting
While you play a huge role in the mortgage underwriting process, so does your lender. So if youre looking for quick underwriting and closing processes, you should consider a private lender like Vaster.
Vaster Capital offers expedited closing timelines so that you can get your keys in a matter of days not weeks. Reach out to our lending experts to learn more about our loan products, the application process, and the closing process.
Why You Can Trust Bankrate
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. Weve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
Bankrate follows a strict editorial policy, so you can trust that were putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.
Our mortgage reporters and editors focus on the points consumers care about most the latest rates, the best lenders, navigating the homebuying process, refinancing your mortgage and more so you can feel confident when you make decisions as a homebuyer and a homeowner.
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What Is The Underwriting Process Of A Mortgage
Mortgage underwriting is the process during your mortgage application where the underwriters check what level of financial risk your lender would be taking by agreeing to give you a mortgage.
Professional underwriters use a series of checks to decide how likely it is that you will default on the mortgage loan youve applied for. If they think theres a big risk you might not repay the mortgage in accordance with the agreement, then your mortgage application could be declined.
An experienced mortgage advisor, like those we work with, can answer all your mortgage-related questions, including the underwriting stage and help with your application to ensure you apply for the right loan and can give all the required details for it.
Its important to always give the correct information as the mortgage underwriting process compares all the answers on your application to your financial history and any discrepancies could mean they wont approve your mortgage.