Conditional Mortgage Approval In Mortgage Process

This Article Is About Conditional Mortgage Approval In Mortgage Process

Once borrowers submits 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 mortgage application with a fine tooth comb
  • The mortgage underwriter will go over income by not just checking off on W-2s and paycheck stubs
  • But will also go over tax returns to see if borrowers had any deductions
  • Gustan Cho Associates offers W-2 Income Only Mortgages where no tax returns are required 
  • This is only offered to W-2 wage earners and is available on FHA, VA, and Conventional Loans

Unreimbursed Expenses

Borrowers who deducted a lot of expenses on tax returns, it will be deducted from monthly income calculations.

The mortgage underwriter will also go over credit report thoroughly and check the following:

  • credit history
  • any delinquencies
  • collections
  • public records
  • bankruptcies
  • foreclosures
  • deed in lieu of foreclosures
  • short sales
  • judgments
  • liens
  • charge offs
  • late payments
  • available credit on revolving credit accounts

Once the mortgage underwriter feels borrowers qualify for mortgage loan, the underwriter will issue a conditional mortgage approval.

What Are Conditions On Conditional Mortgage Approval? We will discuss clearing conditions on a conditional loan approval by the mortgage underwriter on the next paragraph.

How Solid Are Conditional Mortgage Approvals?

Just because borrower gets a conditional mortgage approval does not mean that the mortgage loan is ready to close.

  • A conditional mortgage approval is issued when lender is ready to approve the loan for a clear to close
  • This only holds true 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 borrower will get a clear to close issued

Clear To Close (CTC) means lender is ready to prep closing docs 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 prior to submitting to underwriting:

  • Many times, mortgage processors submit the mortgage package with missing information
  • This is because it was not provided to them by borrowers
  • Depending on the processor, he or she can submit the package with incomplete information and realize that the information that was not submitted will be a condition
  • This is normally a bad practice

For example, here is a case scenario:

  • if the mortgage 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 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 paperwork especially.

Clearing Conditions

For example, an underwriter will issue a conditional mortgage approval on  borrowers 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 loan officer and processor 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 getting conditional mortgage approval with 30 or more conditions
  • No need to panic

Examples Of Conditions On Conditional Mortgage Approval

Clearing Conditions

Conditions requested in a conditional mortgage approval may seem petty and ridiculous but 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
  • There are others that will ask for the most insignificant item that sometimes it does not make sense
  • Borrowers 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

How Underwriters Work

For example, when borrowers 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
  • Borrower got a letter of explanation from the banker stating the fact that the blank page did not have a page number
  • 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 processor, the processor will review the conditions submitted.

  • The processor will not submit parts and pieces of conditions
  • The processor will wait until all conditions have been met and satisfied and will then submit everything all at once
  • If processor forgets to submit one or two conditions from the conditional mortgage approval list, the whole file will get kicked back
  • 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

Underwriters Decisions

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 borrowers
  • Some borrowers get extremely upset that they threaten  loan originator that they will go somewhere else
  • 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 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?

Underwriters Decisions

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 mortgage lender
  • Turnaround time can be anywhere between 24 to 48 hours for the mortgage underwriter to sign off on the conditions and issue a clear to close
  • Quality Control Process

Most mortgage lenders have the underwriter who underwrites the mortgage loan issue the clear to close. Once they receive all of the conditions from the conditional mortgage approval they will issue a CTC.

Some Lenders Have Quality Control

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  the following:

  • 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
  • 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

Home Buyers and homeowners who need to qualify for mortgage with a national direct lender with no mortgage overlays can contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

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