How Do Mortgage Underwriters Qualify Borrowers & Approve Loans
This BLOG On How Do Mortgage Underwriters Qualify Borrowers & Approve Home Loans Was UPDATED On January 4th, 2019
How Do Mortgage Underwriters Qualify Borrowers:
- Credit scores and income is what determines whether a borrower meets the minimum requirements for a lender to review mortgage application
- How Do Mortgage Underwriters Qualify Borrowers is by reviewing all documents provided by the borrower
In this article, we will cover and discuss How Do Mortgage Underwriters Qualify Borrowers & Approve Loans.
Borrowers Need To Meet Agency Mortgage Guidelines
Underwriters make sure that they meet all guideline requirements of the loan program.
- Every mortgage lender has minimum credit scores minimum for them to accept a mortgage loan application
- For example, FHA has a 500 minimum credit score requirement for a mortgage loan borrower to qualify for a mortgage loan
- Lenders have something called overlays which are their own guidelines that surpass the bare agency minimum requirements
- In order to qualify for a 3.5% minimum down payment requirement, borrower needs a minimum credit score of 580 FICO or higher
- Home Buyers with credit scores between 500 and 579 can qualify for FHA Loans but 10% down payment is required
- However, there are many lenders who require minimum credit scores of 620 or 640 FICO or higher
- This is because of their own FHA credit score overlays
- Some lenders even require for their borrowers to have credit scores of 680 FICO or higher
Lenders are allowed to have higher lending requirements than the minimum required by HUD. How Do Mortgage Underwriters Qualify Borrowers is to make sure borrowers meet all Agency Guidelines PLUS the company’s own overlays.
How Do Mortgage Underwriters Qualify Borrowers With Credit Scores And Credit Report
Mortgage underwriters are the decision-makers who decide whether to approve or deny a borrower’s mortgage application.
- Mortgage underwriters will look at borrowers credit scores
- Underwriters will also thoroughly review borrowers credit report
- Underwriters will very carefully analyze and look to see whether the mortgage loan applicant is creditworthy.
- Just because a borrower has high credit scores does not mean that the borrower is financially responsible
On the flip side, just because the borrower has low credit scores, that does not mean that the borrower financially irresponsible.
How Do Mortgage Underwriters Qualify Borrowers With Extenuating Circumstances
There are cases where a borrower has gone through financial hardship such as periods of unemployment, divorce, death in the family, or medical issues.
- The mortgage underwriter will look at a ten-year window of a borrower’s credit scores and credit report as well as payment history
How Do Mortgage Underwriters Qualify Borrowers On Credit History
If a borrower has mediocre credit scores but has had a history of consistent late payments in the past ten years, the mortgage underwriter will probably come to the conclusion that the applicant is not a financially responsible borrower. The chances are that their mortgage loan application will not get approved.
- However, if the mortgage loan applicant has had five years of perfect credit and a two year of credit derogatory and late payments
- Mortgage Underwriters will review whether or not the borrower had a great payment history and re-established credit in the past two to three years
- The mortgage underwriter will consider this particular mortgage loan applicant a genuine financially responsible mortgage applicant who has gone through a short period of hardship
Underwriters will look at whether or not the borrower has since recovered and will deem this candidate a good credit risk.
Credit Scores And Credit Report
Credit scores and credit report is used by underwriters as a measure of predicting the financial credit risk of the mortgage loan applicant.
- Studies prove that a person’s past credit payment behavior is a great predictor of how he or she will pay their credit obligations in the future
- If a mortgage loan applicant has had a long history of not paying his or her bills on time
- The chances are that they will not change this behavior in the future
The chances that this person will get a mortgage loan approval will be extremely slim.
Recent Payment History & Bank Overdrafts
Borrowers who are going to plan on getting a mortgage loan make sure to pay monthly bills on time and not have any late payments in the past 12 months.
- Bank overdrafts are closely scrutinized as well
- Many banks and mortgage bankers will not even look at any mortgage loan applicants who have had even a single overdraft in the past twelve months
Even if the overdraft was one dollar some lenders will not approve a borrower.
Qualifying With Direct Lender With No Overlays
Gustan Cho Associates at Loan Cabin Inc. are direct lenders with no lender overlays on government and conventional loans.
- We will accept late payments in the past 12 months if the Automated Underwriting System yields an approve/eligible
- Overdrafts in the past 12 months are allowed with us as long as they can provide a good letter of explanation
- Being hungover and not being able to make a payment prior to a due date is not a good letter of explanation
Borrowers who need to qualify for mortgage home loan with a direct lender with no overlays, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Over 75% of our borrowers are folks who either gotten a last-minute loan denial by other lenders or are stressing over the mortgage process due to being improperly issued a pre-approval. All of our pre-approvals close because all pre-approvals at Gustan Cho Associates are full credit approvals issued by our mortgage underwriters. We are available 7 days a week, evenings, weekends, holidays via phone or email us at email@example.com.