How To Avoid Getting Denied For Mortgage After Conditional Approval

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How To Avoid Getting Denied For Mortgage After Conditional Approval

This BLOG On How To Avoid Getting Denied For Mortgage After Conditional Approval Was UPDATED And PUBLISHED On November 16th, 2019

Denied After Conditional Mortgage Approval
Gustan Cho Associates

Can borrowers get denied for mortgage after conditional approval?

  • There is no guarantee in the mortgage world that a deal will close until it has closed and funded
  • There is no reason why borrowers cannot close on their pre-approvals
  • The number one reason for last minute loan denial and/or stress during mortgage process is due to the fact that borrowers were not properly qualified

In this article, we will cover and discuss and answer the question of Can Borrowers Get Denied For Mortgage After Conditional Approval.

Hasty Pre-Approvals Is Number One Reason For Stress

Hasty Pre-Approvals Is Number One Reason For Stress

Loan Officers issuing pre-approvals without properly qualifying borrowers is the main reason for stress during mortgage process:

  • When borrowers first contact a loan originator for a pre-approval, they are instructed to complete a 4 page 1003
  • This is called the official mortgage application
  • The loan originator will then run credit and review and process the following:
    • credit scores
    • credit disputes
    • review credit history to see if borrowers have had any late payments in the past 12 months
    • any unsatisfied judgments
    • review collection accounts and/or derogatory credit items
    • Check and question borrowers if they had a prior bankruptcy, foreclosure, deed in lieu of foreclosure, short sale and see, whether borrowers meet the waiting period

Importance Of Automated Underwriting System

Importance Of Automated Underwriting System

The mortgage loan originator will then run mortgage application through an Automated Underwriting System:

  • Fannie Mae’s version of the Automated Underwriting System is the Desktop Underwriter DU
  • Freddie Mac’s version of the Automated Underwriting System is the Loan Prospector LP
  • The automated underwriting system will analyze all the information on the mortgage loan application
  • AUS will also credit report and credit score and if the mortgage loan applicant qualifies
  • If everything is in check, AUS will render an approve/eligible per automated findings
  • Mortgage lenders like myself have no mortgage lender overlays
  • We just go off automated findings
  • As long as the mortgage loan applicant can meet all the conditions from the automated findings, borrowers will get approved and closed

What Is A Conditional Loan Approval?

What Is A Conditional Loan Approval?

Conditional approval is when the mortgage loan underwriter has reviewed all of the mortgage documents.

This is including the following:

  • Mortgage Application
  • Credit Scores
  • Credit Report
  • Two years of tax returns
  • Two years W-2s
  • Recent bank statements
  • Verified borrower’s employment
  • Letters of Explanations
  • Bankruptcy and/or housing event docs
  • Divorce decree if applicable

Conditional Loan Approval Issued By Underwriters

Conditional Loan Approval Issued By Underwriters

A conditional approval is when a mortgage underwriter feels comfortable in issuing a full mortgage loan approval once all the conditions are met:

  • Conditions are updated information or more information underwriters need in order to issue a clear to close
  • Borrowers can get denied for mortgage after conditional approval if they cannot meet conditions

What Are Mortgage Conditions On Conditional Approval?

What Are Mortgage Conditions On Conditional Approval?

Mortgage conditions on a conditional approval are items borrowers need to provide for the mortgage underwriter to issue a clear to close.

  • A clear to close is when the mortgage underwriter certifies that the mortgage lender is ready to close and fund the mortgage loan
  • Example of mortgage conditions are the following:
  • Again, once all conditions have been submitted to the mortgage processor, the file will be submitted to an underwriter for clearance for a clear to close

Denied For Mortgage After Conditional Approval Due To Delays In Submitting Conditions

Denied For Mortgage After Conditional Approval Due To Delays In Submitting Conditons

Unfortunately, there are cases where a mortgage underwriter has overlooked some conditions when the initial conditional loan approval has been issued.

There are times when a mortgage processor submits final conditions for a clear to close, the underwriter can come back with more added conditions.

  • Whatever conditions the underwriter gets back with, the conditions need to be submitted even though they are added conditions and has not been requested before
  • Mortgage underwriters can always come back with more conditions
  • This can get quite frustrating
  • In order to get a clear to close, everyone is on the hands of the mortgage underwriter
  • This is because the underwriter has the final say on issuing the clear to close

Can I Get Denied For Mortgage After Conditional Approval?

Can I Get Denied For Mortgage After Conditional Approval?

Unfortunately, there are cases where a mortgage loan applicant gets denied after conditional approval has been issued.

  • Some of the reasons why conditional approval turns into a mortgage loan denial are the following:
    • when a borrower quits their job
    • does not have enough funds to close
    • has a recent late payment
    • has incurred more debt
    • cannot provide verification of rent
    • or cannot meet one or more of the mortgage conditions from the items on the conditional approval

Can I Re-Apply For Mortgage If Denied?

Can I Re-Apply For Mortgage If Denied?

Over 75% of our borrowers are folks who could not qualify from another lender or have gotten denied at the last minute due to their overlays. Or they were denied at the last minute due to not being properly qualified.

  • Gustan Cho Associates has no lender overlays
  • We are experts in creative financing
  • We can help borrowers who have a hard time qualifying for a mortgage loan elsewhere
  • Minimum credit scores to qualify for a 3.5% down payment FHA Loans is 580
  • There is no minimum credit score requirements or debt to income ratio caps on VA Home Loans
  • We just follow Fannie Mae and/or Freddie Mac automated findings
  • We have zero overlays on FHA loans, VA loans, USDA loans, Conventional Loans

To get a fast pre-approval, click GET PRE-APPROVED NOW or email us at gcho@loancabin.com or call us at 262-716-8151.  Or Text us for faster response.  Or email us at gcho@gustancho.com. Our support and licensed personnel are available 7 days a week, holidays included.

Related> What is a conditional mortgage approval?

Related> Conditional mortgage approval: Road to clear to close

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