Conditional Mortgage Approval

Once you submit your mortgage loan application, it gets processed and submitted to underwriting.  Once it is submitted to underwriting, it gets assigned to a mortgage underwriter.  The mortgage underwriter’s job is to analyze and scrutinize every aspect of your mortgage application with a fine tooth comb.  The mortgage underwriter will go over your income by not just checking off on your W-2s and paycheck stubs but will also go over your tax returns to see if you had any deductions.

Unreimbursed Expenses

If you deducted a lot of expenses on your tax returns, it will be deducted from your monthly income calculations.  The mortgage underwriter will also go over your credit report thoroughly and check your credit history, any delinquencies, any collections, public records, bankruptcies, foreclosures, deed in lieu of foreclosures, short sales, judgments, liens, charge offs, late payments, and available credit on your revolving credit accounts.  Once the mortgage underwriter feels that you qualify for a residential mortgage loan, the mortgage loan underwriter will issue a conditional mortgage approval.

What Are Conditions On Conditional Mortgage Approval?

Just because a mortgage loan borrower gets a conditional mortgage approval does not mean that the mortgage loan is ready to close. A conditional mortgage approval is that the mortgage lender is ready to approve the loan for a clear to close as long as the conditions on the conditional mortgage approval commitment has been met.  There may be one or two conditions or I have seen as many as 50 or more conditions on a conditional mortgage approval.  As long as all the conditions on the conditional mortgage approval have been met, the mortgage loan borrower will get a clear to close issued, which means that the mortgage lender is ready to fund the mortgage loan.

Key To Limiting The Amount Of Conditions On Conditional Mortgage Approval

The key to having as little conditions as possible on a conditional mortgage approval is to get the mortgage loan package as complete as possible.  Many times, mortgage loan processors submit the mortgage package with missing information because it was not provided to them by the mortgage loan borrower.  Depending on the mortgage loan processor, he or she can submit the package with incomplete information and realize that the information that was not submitted will be a condition.  For example, if the mortgage loan processor were to submit just one month’s bank statements and not the two months bank statement required, the mortgage underwriter will condition for the missing one month bank statements.  To avoid getting a long list of conditions, the key is to provide a complete as possible mortgage loan package to underwriting.  A good processor will have even letters of explanations from the mortgage loan borrowers in the original mortgage package.

Bankruptcy And Foreclosure

For example, a mortgage loan underwriter will issue a conditional mortgage approval on a mortgage loan borrower who had a prior bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale.  However, the mortgage underwriter will condition for letters of explanations on why the mortgage loan applicant filed bankruptcy, or had a foreclosure, deed in lieu of foreclosure, or short sale.  A seasoned professional mortgage loan officer and mortgage loan underwriter will ask for this information before it gets submitted to underwriting.  Same goes with credit inquiries which most people have.  A mortgage underwriter will condition for letters of explanations on credit inquiries after issuing the conditional mortgage approval.  Submitting the letter of explanations on the credit inquiries before getting it submitted to the underwriter will eliminate that condition.  Do not be surprised if you get a conditional mortgage approval with 30 or more conditions.  No need to panic.

Examples Of Conditions On Conditional Mortgage Approval

Conditions requested in a conditional mortgage approval may seem petty and ridiculous but you need to provide the mortgage underwriter on what he or she is asking for.  Not all underwriters are created equal.  There are mortgage underwriters that are super reasonable while there are others that will ask for the most insignificant item that sometimes it does not make sense.  You also need to understand the stress and financial responsibility mortgage underwriters have.  One mistake from a mortgage underwriter can mean that the underwriter’s mortgage company cannot sell the mortgage loan they originate on the secondary market.  A mortgage underwriter will get scrutinized if the mortgage loan they approve ends up going into default.  I can understand why mortgage underwriters are so anal when it comes to conditions.

Documents Requested By Underwriters

For example, when you provide bank statements to mortgage underwriters, all pages needs to be provided including blank pages.  One mortgage underwriter did not issue a clear to close because one of the blank pages did not have a page number.  The actual blank page from the bank statement did not have a blank page number.  Mortgage loan borrower got a letter of explanation from the banker stating the fact that the blank page did not have a page number and the banker signed, stamped, and dated the letter along with a fresh bank statement ( No page number on the blank page ) but the underwriter did not honor it.  Fortunately, the file did get a clear to close because the managing underwriter signed off on it.  Cases like these can happen with conditions from the conditional mortgage approval.

Clear To Close

Once all of the conditions have been turned in to the mortgage loan processor, the mortgage loan processor will review the conditions submitted.  The mortgage loan processor will not submit parts and pieces of conditions.  The mortgage loan processor will wait until all conditions have been met and satisfied and will then submit everything all at once.  If the mortgage processor forgets to submit one or two conditions from the conditional mortgage approval list, the whole file will get kicked back and the whole file will go at the back of the line which will then cause a delay in getting a clear to close.  It is of major importance that the whole set of conditions gets submitted at once.

Updated Mortgage Loan Approvals: New Sets Of Conditions

Once the mortgage underwriter goes through the conditions that was requested, two things can happen.  A clear to close is normally issued at this time, however, the mortgage underwriter can decide to attach another set of conditions.  When the mortgage underwriter adds more conditions and does not sign off on the original conditions list, this is where it upsets everyone, especially the mortgage loan borrower.  Some borrowers get extremely upset that they threaten the mortgage loan originator that they will go somewhere else and there are cases where sellers threaten to retract the purchase contract when extensions are requested from the buyer’s side when additional conditions are requested from the mortgage underwriter.  There is no way of fighting this.  The best thing to do is do what the mortgage underwriter asks and get them the additional conditions as soon as possible so he or she can sign off on a clear to close.

How Long Does It Take For Underwriter To Review Conditions?

There are cases where conditions gets submitted to mortgage underwriters and everyone is waiting for a clear to close.  How long does it take for an underwriter to sign off on final conditions?  Probably no more than 30 minutes.  Unfortunately, even if all conditions are turned in, depending on the wholesale mortgage lender, the turnaround time can be anywhere between 24 to 48 hours for the mortgage loan underwriter to sign off on the conditions and issue a clear to close.

Quality Control Process

Most mortgage lenders have the mortgage loan underwriter who underwrites the mortgage loan issue the clear to close once they receive all of the conditions from the conditional mortgage approval.  However, there are some mortgage companies that once the mortgage underwriter signs off on the conditions, the whole mortgage package goes to QC.  The Quality Control process normally takes 48 hours.  What the QC underwriter does is re-review the whole file to make sure that there was no mistakes make.  QC will go over the appraisal, might do a verbal verification of employment, run a soft credit pull to make sure that the mortgage loan borrower did not incur more debt, and make sure the whole mortgage file is in compliance.  Once it passes QC, the mortgage loan is issued a clear to close.  Again, not all mortgage companies have Quality Control but for those that due, this process takes at least 48 hours or more.

Gustan Cho

www.gustancho.com

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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