Preparing For Mortgage Loan Conditions For Clear To Close
This BLOG On Preparing For Mortgage Loan Conditions For Clear To Close Was UPDATED On July 16, 2017
Getting a residential mortgage loan is a process.
- The first stage of the process is completing a mortgage application, also known as the 1003.
- It is a 4 page mortgage application where you need to complete personal questions such as the borrower’s name, address, social security number, date of birth, phone numbers, places of employments, previous employers, previous addresses, subject property, assets, liabilities, income information, credit information, and answer questions about credit history, financial history, and financial status.
- All the information on the 1003 will need to verified via tax returns, 2 month bank statements, W-2’s, pay check stubs, bankruptcy papers if it applicable, divorce decree if applicable, tax lien releases if it applies, and 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 qualifying credit score.
Mortgage Loan Processing And Mortgage Loan Underwriting
- A processor processes the mortgage loan application and cross checks the items stated on mortgage application to the items provided by borrowers.
- The processor makes sure that the all income, assets, and liabilities are supported by the documents submitted.
- They make sure there are no overdrafts, does a verification of employment, and 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 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 and the underwriter will probably issue less mortgage loan conditions.
Mortgage Underwriting Process
Once the processor submits 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 ability of borrower to repay the new mortgage loan.
- The mortgage loan underwriter needs to feel confident that borrowers are able to pay 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 needs 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.
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 cancelled checks for rental verification.
- Insurance information.
- Updated bank statements, pay check stubs, proof of funds for down payment.
- Mortgage loan conditions must be met before the issuance a clear to close.