In this blog, we will cover and discuss mortgage approval conditions and clearing for a CTC. The initial conditional loan approval by the mortgage loan underwriter will list a set of conditions by the mortgage underwriter. Once the conditions are satisfied, the mortgage underwriter will issue the clear to close. Here are the topics we will cover in this article:
- The steps in the mortgage process
- What is a conditional loan approval
- What are mortgage conditions
- Who gathers the conditions
- What is a clear to close
- Who issues a clear to close
Once the conditions are gathered, the mortgage processor submits the conditions to the mortgage underwriter for a clear to close.
Conditions Requested by the Mortgage Underwriter
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.
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.
What Does a Clear to Close Mean?
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
When a borrower gets 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.
Common Conditions from Conditional Loan Approval
Examples of conditions can be updated bank statements, letters of explanations of items. Examples of conditions include 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 Potential Conditions From the Mortgage Underwriter
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 few conditions as possible. The trick in 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
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
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. Manual underwriting require verification of rent. This also holds true for borrowers with credit scores of under 620 FICO. Gustan Cho Associates is one of the very few national lenders that will accept a rent-free letter by borrowers who are living with family and do not have a VOR in lieu of rental verification.
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. When they get a conditional loan approval by an underwriter that states verification of rent is required. However, Gustan Cho Associates will accept a rent-free letter from a family member in lieu of verification of rent. Contact us for more details.
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. All conditions should not be submitted piecemeal. They should be collected and submitted all at once. 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 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com.
