How Do Underwriters Approve Mortgage Loans For Borrowers

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How Do Underwriters Approve Mortgage Loans For Borrowers

This BLOG On How Do Underwriters Approve Mortgage Loans For Borrowers Was UPDATED On November 11th, 2018

Mortgage Underwriters play the most important role in the mortgage process. There are certain ways on how do underwriters approve mortgage loans:

  • Underwriters are professionals who approve or deny mortgage loans
  • There is no reason why a loan should get a denial if they were properly qualified by the loan officer
  • Unfortunately, like in any other professions, there are underwriters who will drag their feet
  • They will issue conditions after conditions after the initial conditional loan approval which does not happen with Gustan Cho Associates

How do underwriters approve mortgage loans?

  • Mortgage underwriters are the people who decide whether to approve or deny a mortgage loan application
  • Mortgage underwriters are trained professionals who have a lot of responsibilities to their employers
  • One mistake on one loan file may cost the mortgage company a lot of money
  • If mortgage underwriters do not follow the federal minimum lending guidelines as well as their investor mortgage lender overlays, that may mean that the mortgage loan is not salable
  • It may mean mortgage loan needs to be kept in house
  • Lender will be stuck with the loan until the borrower refinances or pays off balance

Lending Guidelines Underwriters Follow

How Do Underwriters Approve Mortgage Loans?  

  • Mortgage underwriters needs to follow two types of lending guidelines as well as their own lender overlays
  • Federal lending guidelines needs to be followed by all underwriters
  • Overlays depends on the individual mortgage company
  • This is because each lender has their own overlay requirements
  • Federal lending guidelines are specific mortgage lending guidelines on the particular loan programs
  • For example, FHA Loans need to adhere to HUD Guidelines
  • Conventional Loans needs to adhere to Fannie Mae and Freddie Mac guidelines
  • VA Loans need to adhere to Department of Veteran Affairs guidelines
  • USDA Loans need to adhere to USDA Rural Development guidelines

How Do Mortgage Underwriters Approve Mortgage: Overlays

The Gustan Cho Team at Loan Cabin Inc. is one of a few national mortgage companies in the nation that has no lender overlays

We just go off DU/LP FINDINGS. Overlays are guidelines that are in additional guidelines above and beyond the minimum set by FHA, VA, USDA, FANNIE MAE, and FREDDIE MAC.

How do underwriters approve mortgage loans? Overlays

  • Underwriters need to make sure that borrowers meet minimum lending requirements on the particular loan programs
  • FHA Minimum credit score requirements are 580 FICO
  • Debt to income ratio requirements is 43% DTI if borrower has credit scores under 620 FICO
  • If over 620 FICO, back end debt to income ratio can be capped at 56.9% DTI
  • Front end debt to income ratio is capped at 46.9% DTI
  • Many lenders will have overlays on credit scores and debt to income ratios
  • Most lenders want a 620 Credit Score and debt to income ratios not to exceed 50% DTI
  • However, The Gustan Cho Team at Loan Cabin Inc. has no overlays on credit scores and debt to income ratios
  • We just go off the automated findings
  • Outstanding collections and charge offs do not have to be paid on FHA and VA Loans
  • However, most lenders will have overlays on collections and charge offs
  • They will limit the amount of collections or charge off account balance borrowers can have or have to pay off
  • The Gustan Cho Team at Loan Cabin Inc. does not have any overlays on collections and charge off accounts no matter how much the outstanding balance is

Conditional Mortgage Loan Approval

Once a mortgage underwriter has thoroughly reviewed the file and has determined borrower meets all federal guidelines as well as the investor overlays, the underwriter will issue a conditional mortgage loan approval.

  • A conditional loan approval is when the underwriter decides that he or she will issue a clear to close once borrower can meet all conditions that is listed on the conditional loan approval
  • The mortgage processor gets assigned the file again
  • It is the job of processor to quarterback the file with the loan originator and borrower
  • Once conditions has been met, the underwriter then issues a clear to close
  • This means that the mortgage company is ready to send out mortgage documents to the title company as well as fund the loan

Mortgage underwriters need to follow rules and regulations. Many borrowers think that depending on the mood of the underwriter, they can approve or deny the loan applicant. That is not the case. Underwriters need to be super careful not to make any mistakes when underwriting and make sure borrowers meets all of the lending guidelines on the particular loan program as well as their investor overlays.

Mortgage Underwriting At Gustan Cho Associates At Loan Cabin Inc.

Gustan Cho Associates at Loan Cabin Inc. is a national mortgage banking firm headquartered in Lombard, Illinois with a national reputation of having no overlays on the following:

  • No Overlays On VA Loans with the exception of requiring a 580 Credit Score
  • No Overlays On FHA Loans
  • No Overlays On USDA Loans
  • No Overlays On Fannie Mae and Freddie Mac Conventional Loans
  • Closings in 21 days or less on complete files
  • Over 75% of the borrowers at The Gustan Cho Team at Loan Cabin are folks who either got a last minute mortgage loan denial or are stressing over the mortgage process. We take them over and close their home loans in record time.
  • There is no stress during the mortgage process with Gustan Cho Associates At Loan Cabin Inc.

To qualify with a lender with no overlays or home buyers going through a stressful mortgage process with current lender, contact Gustan Cho NMLS 873293 at Gustan Cho Associates at Loan Cabin Inc. at 262-716-8151 or text for faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays to take your mortgage inquiry and answer any questions you may have.

This BLOG On How Do Underwriters Approve Mortgage Was UPDATED On November 11th, 2018

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