Mortgage Approval Conditions And Clearing For A Clear To Close

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Mortgage Approval Conditions And Clearing For A Clear To Close

This BLOG On Mortgage Approval Conditions And Clearing For A Clear To Close Was PUBLISHED On July 8th, 2019

Mortgage Approval Conditions And Clearing For A Clear To Close

Mortgage Approval Conditions In Mortgage Process

The mortgage process is a process that every mortgage loan application needs to go through.

  • After a mortgage loan originator issues a pre-approval letter, the home buyer will then shop for a home
  • Once they find a home they want to purchase, they enter into a real estate purchase contract
  • Once the home buyer submits the executed signed home purchase real estate contract to the loan officer, the mortgage process starts
  • The mortgage loan originator will be requesting documents such as two years tax returns, two years W-2s, 30 days paycheck stubs, 60 days paycheck stubs, and other documents so the file can be submitted to processing

In this article, we will discuss Mortgage Approval Conditions And Clearing For A Clear To Close.

Steps In The Mortgage Process

Steps In The Mortgage Process

A mortgage loan processor then prepares the mortgage application file:

  • The processor gets it ready to submit to underwriting for the mortgage underwriter to analyze the whole mortgage loan file so the borrower can get a conditional mortgage loan approval
  • Once the underwriter reviews the mortgage loan applicant’s file and feels comfortable with the overall credit and income profile of the borrower, the underwriter will issue a conditional mortgage loan approval
  • Conditional loan approval means the borrower will get approved for the mortgage as long as they can meet the mortgage approval conditions stated on the approval
  • The key with every mortgage loan application is to get it submitted as complete as possible so there are not too many conditions
  • Every mortgage approval conditions need to be satisfied for the mortgage loan underwriter to issue a clear to close

A clear to close is when the underwriter signs off on the borrower. A CTC means the lender is ready to prepare mortgage loan closing docs and the lender is ready to fund the loan.

What Are Mortgage Approval Conditions

What Are Mortgage Approval Conditions

When a borrower gets a conditional mortgage approval, it comes with mortgage approval conditions.

  • Mortgage conditions need to be satisfied in order for the conditional mortgage approval to become an official mortgage approval and to get a clear to close
  • If any of the mortgage approval conditions are not satisfied, the mortgage loan file will not get a clear to close issued
  • A sloppy processed mortgage loan application will definitely come back with a lot of mortgage conditions by the underwriter
  • Examples of conditions can be updated bank statements, letters of explanations of items such as gaps in employment, credit inquiries, overdrafts, reasons for a short sale, reasons for bankruptcy, reasons for deed in lieu of foreclosure, reasons for foreclosures
  • Other conditions may be providing full child support and divorce paperwork, bankruptcy documents, divorce documents, appraisal, homeowners insurance invoice, verification of rent, verification of mortgage, verification of deposit, verification of employment, and credit supplements

The key in the mortgage business is to have as little conditions as possible. The trick is getting the least amount of conditions is to have the file as complete as possible prior to submission to underwriting.

Cases Where Mortgage Approval Conditions Cannot Be Met

Cases Where Mortgage Approval Conditions Cannot Be Met

There are cases where mortgage approval conditions cannot be met and the conditional mortgage loan approval will become null and void.

  • As mentioned in many of my other articles, the pre-approval stage of the mortgage process is the most important stage of the whole mortgage application and approval process
  • If a loan originator is not diligent when pre-qualifying and pre-approving borrowers and issues a sloppy pre-approval letter, the whole deal may be a dead deal

There are so many cases where a borrower gets a last-minute mortgage loan denial by a lender just because the mortgage loan originator was not diligent in pre-qualifying the borrower.

Importance Of Verification Of Rent On Manual Underwriting

Importance Of Verification Of Rent On Manual Underwriting

One common example where a conditional mortgage approval becomes a loan denial is when the underwriter asks for verification of rent but the borrower cannot provide a VOR.

  • This is because they have been living rent-free with family
  • Verification Of Rent is required on all manual underwriting as well as borrowers with credit scores of under 620 FICO

Gustan Cho Associates at Loan Cabin Inc. are one of the very few national lenders that will accept a rent-free letter by borrowers who are living with family and does not have a VOR in lieu of rental verification.

VA And FHA Loans During And After Chapter 13 Bankruptcy

VA And FHA Loans During And After Chapter 13 Bankruptcy

There are many loan officers who take on an FHA and/or VA mortgage loan application from a borrower right after a Chapter 13 Bankruptcy discharge.

  • VA and FHA are the only two loan programs that accept manual underwriting
  • Borrowers can qualify for FHA and VA Loans during Chapter 13 Bankruptcy Repayment Plan with Trustee Approval with manual underwriting
  • There are no waiting period requirements after Chapter 13 Bankruptcy discharge date on VA and FHA Loans with manual underwriting
  • They submit it as a manual underwriting file and when they get a conditional loan approval by an underwriter that states verification of rent is required
  • The mortgage originator realizes that the borrower is living rent-free with family and cannot satisfy the verification of rent
  • This mortgage loan file which has been conditionally approved will result in a mortgage loan denial by most lenders

However, Gustan Cho Associates will accept a rent-free letter by a family member in lieu of verification of rent. Contact us for more details.

Stress With Mortgage Approval Conditions

Stress With Mortgage Approval Conditions

There are times where mortgage underwriters will list tons of mortgage approval conditions where borrowers can stress over it.

  • However, many times when underwriters list conditions, the processor may have the conditions already and may be duplicated
  • Borrowers should not stress out over mortgage conditions and provide them one by one and submit them all at once
  • Submitting mortgage conditions piecemeal is not recommended
  • If it will take you an extra few days to accumulate all of the mortgage conditions to send it all at once

For more information about the content of this article or other mortgage-related topics, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com.

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