This BLOG On Preparing For Mortgage Loan Conditions For Clear To Close Was UPDATED And PUBLISHED On November 19th, 2020
Getting a residential mortgage loan is a process.
- The first stage of the process is completing a mortgage application, also known as 1003
It is a 4-page mortgage application where you need to complete personal questions such as the following:
- borrower’s name
- social security number
- date of birth
- phone numbers
- places of employment
- previous employers
- previous addresses
- subject property
- assets, liabilities
- income information
- credit information
- answer questions about credit history, financial history, and financial status
In this blog, we will discuss and cover Preparing For Mortgage Loan Conditions the right way so there is no delays in the mortgage underwriter issuing a clear to close.
Preparing For Mortgage Loan Conditions: Importance Of Complete And Legible Documents
All the information on 1003 will need to verified via tax returns:
- 2-month bank statements
- W-2’s, paycheck stubs
- bankruptcy papers if it applicable
- divorce decree if applicable
- tax lien releases if it applies
- other personal financial and credit documents
- A credit check will be pulled from the three giant credit reporting agencies; Experian, Equifax, and Transunion
- The middle credit score will be used as a qualifying credit score
In this article, we will cover and discuss Preparing For Mortgage Loan Conditions For Clear To Close.
Mortgage Loan Processing And Mortgage Loan Underwriting
- A processor processes the mortgage loan application
- Cross checks the items stated on the mortgage application to the items provided by borrowers
- The processor makes sure that all income, assets, and liabilities are supported by the documents submitted
- They make sure there are no overdrafts, does verification of employment
- Makes sure that all supporting documents are attached to mortgage file
- A mortgage processors job is to get mortgage file as complete as possible to avoid as much mortgage loan conditions as possible by the underwriter
- An incomplete file will delay a mortgage application
- This is because the mortgage underwriter will kick back the mortgage file with tons of mortgage loan conditions
- A good processor will make the underwriter’s job much easier
The underwriter will probably issue less mortgage loan conditions.
Mortgage Underwriting Process
Once the processor submits a mortgage loan application to the underwriter. It is the underwriter’s job to approve or deny the mortgage loan.
- The mortgage underwriter will review borrowers mortgage application, credit report, documents submitted, appraisal, and other financial data
- Credit, income, liabilities, assets will be thoroughly reviewed to determine credit risk
- Credit risk is the ability of the borrower to repay the new mortgage loan
- The mortgage underwriter needs to feel confident that borrowers are able to pay a new mortgage loan without struggling to pay every month
- The mortgage underwriter will evaluate every aspect of personal and financial profile
- Mortgage Underwriters will make sure that borrowers meet all mortgage guidelines and lender overlays
Once the underwriter feels somewhat confident, the mortgage underwriter will issue mortgage loan conditions to proceed to the next level.
Mortgage Process And Conditional Loan Approval
A mortgage underwriter will issue a conditional mortgage loan approval.
- The mortgage loan conditions need to be satisfied in order for a full clear to close
- It is the mortgage processors job to gather all of the mortgage loan conditions
- Once the mortgage processor gathers all the conditions, it is then submitted to the same underwriter for a clear to close
Once the underwriter reviews all of the conditions and feels comfortable, the underwriter will issue a clear to close.
Preparing For Mortgage Loan Conditions: Typical Conditions Of Conditional Loan Approval
Some examples of mortgage loan conditions are the following:
- Request bankruptcy papers and/or letter of explanation why borrower filed bankruptcy
- Mortgage applicants who hopped jobs, letters of explanations why they had job gaps or why hopped around so much
- Verification of employment
- Letters of explanations on credit inquiries
- Large bank deposits or withdrawals; will need letters of explanations and proof to explain large deposits and withdrawals
- Copies of canceled checks for rental verification
- Insurance information
- Updated bank statements paycheck stubs, proof of funds for the down payment
Mortgage loan conditions must be met before the issuance a clear to close. The mortgage underwriter can recondition a borrower on conditions that were not listed before.