How Loan Officers Prepare Borrowers

How Loan Officers Prepare Borrowers For Mortgage Underwriters

Gustan Cho Associates are mortgage brokers licensed in 48 states

This BLOG On How Loan Officers Prepare Borrowers For Mortgage Underwriters Was PUBLISHED On January 14th, 2019

How Loan Officers Prepare Borrowers for mortgage underwriters depends on the individual loan officer.

  • Most experience loan officers will make sure all mortgage documents is complete before submitting a loan
  • Any missing docs and/or pages will be potential delays in getting a clear to close
  • If mortgage underwriters see that certain important docs are missing, the underwriter will kick the file back to the loan officer

The mortgage process then gets delayed. 

How Loan Officers Prepare Borrowers With Regards To Credit And Income

Most experienced veteran loan officer know that an underwriter can suspend an incomplete file.

  • They make sure that the file is complete and their borrowers is fully qualified for the particular loan program they qualified them for
  • The initial qualification stage of the mortgage process is the most important stage
  • The number one reason for a last minute mortgage denial and/or stress during mortgage process is due to the loan officer not properly qualifying borrowers

Importance On What Loan Officers Asks Borrowers



The first major step in the mortgage process is for us to look at your credit.  The credit score is very important but also what makes your score what it is. 

  • If you have a 640 credit but you have multiple disputes the underwriter will make you remove these disputes
  • If there is a derogatory mark, it’s within 2 years of the date the credit was pulled and over $1,000 balance left on the account, underwriters will have borrower retract the dispute
  • The reason is that when you dispute a tradeline it covers it up as if it does not exists
  • When you remove it your score may drop and you may not get an approve eligible on the automated underwriting system

Public Records Search By Mortgage Lenders

Also, the underwriter may look at Public records. 

  • This is where Bankruptcies show up
  • There are rules to Bankruptcies
  • 2 years from discharge date for FHA and VA
  • 4 years from discharge date for Conventional
  • This can automatically disqualify you
  • Chapter 13 is at least 12 months from file date
  • But this is an automatic downgrade to a manual underwrite

How Mortgage Underwriters View Credit Inquiries

New inquiries are something an underwriter will look at. 

  • For example, they may see a recent Auto inquiry
  • Your credit may not have updated to show this tradeline
  • Your mortgage loan officer may not ask you about it
  • The underwriter may figure out that you have a new debt that wasn’t calculated in your debt ratios now that would disqualify you

How Loan Officers Prepare Borrowers With Late Payments In Past 12 Months

The automated underwriting system is very heavily weighted to the last 12 months. 

  • It doesn’t like seeing installment or housing late payments in the last 12 months
  • It also doesn’t like to see only 2 credit cards that have only been open 2 months each
  • Or a lot of 30 day late payments on multiple accounts

As you can see it is just not your credit score that matters. 

How Loan Officers Prepare Borrowers When Qualifying Income


  • Income documents consist of Personal tax returns, business tax returns, w2s, paycheck stubs, bank statements (for bank statement program only), social security, disability, child support and more

Tax returns for self-employed are the most complicated. 

  • You as a borrower may think that you make $100,000 a year
  • But when it comes to underwriting you have deductions and additions that have to be added or subtracted


  • If you write off 2000 a month for business expenses that will come off your top line and leave with a smaller bottom line
  • It is called your adjusted gross income
  • Usually much smaller than most clients think they can use for income
  • You also have to average the last 2 years adjusted gross income
  • If the most recent year declined from the previous year then you have to go off most recent so you don’t average

How Loan Officers Prepare Borrowers With W2 Wage Earners

How Loan Officers Prepare Borrowers With W2 Wage Earners

W2 income is usually the easiest. 

  • If you are a salary income then you can go off your current new salary regardless of the last 2 years W2
  • The paycheck stubs may show overtime and bonus
  • These additional income streams have the same rule
  • They average the last 2 years and they cannot be decreasing too much

Grossing Up NON-Taxable Income Of Borrowers

Social security and disability can be what is called Grossed up. 

  • FHA and conventional allows you to use 115% of the net you receive from them
  • VA allows 125% gross-up
  • You have to show that this income will continue for the next 3 years to use it

Child support is usable income if you can show the last 6 months receipts on time and proof it will continue for the next three years.

How Loan Officers Prepare Borrowers ASSETS

An underwriter is going to ask you for the last 2 months of bank statements. 

  • If there are any unusual deposits then you may not be able to use those assets
  • Cash deposits are a NO-NO
  • Quick pays are a no

Anything outside of payroll will be heavily scrutinized.  My friend paid me back a loan I gave him only works if you can show a loan agreement and proof of you giving them money in a check form and them paying you back with a check.

So remember the last 2 months of bank statements should not have unusual deposits.

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