This BLOG On Mortgage Loan Underwriting Process For Home Buyers Was UPDATED And PUBLISHED On May 17th, 2020
The mortgage loan underwriting process is the most important process out of the whole mortgage process .
- The mortgage loan underwriter is the person that decides whether or not to approve a mortgage loan application
- The mortgage underwriter is also the person who decides in issuing a clear to close
- A clear to close is when the mortgage loan underwriter will sign off on borrower
- CTC is when the lender is ready to send closing documents out to the title company and fund the loan
The mortgage loan underwriting process starts after the loan originator issues the pre-approval letter. Once the home buyer submits the executed real estate purchase contract the official process starts.
Documents Required To Start Processing And Underwriting Mortgages
The following documents needs to be provided and processed by the mortgage processor:
- two years tax returns
- two years W-2s
- 30 days paycheck stubs
- two months bank statements
- bankruptcy paperwork if applicable
- foreclosure paperwork if applicable
- short sale paperwork if applicable
- divorce decree if applicable
- 401k and retirement accounts if applicable
- child support paperwork if applicable
- alimony paperwork if applicable
- any other documents that the mortgage loan originator may deemed necessary
The loan originator’s job is to get the mortgage loan package as complete as possible so he or she can submit it to the processing department of the mortgage company.
Once the loan officer has accumulated all of the necessary documents by the borrower, the loan officer will then submit documents, loan application, and credit reports to the mortgage processing department.
- The mortgage file gets assigned to a mortgage loan processor
- he mortgage processor’s job is to make sure that all of the documents the loan originator has received by borrower is as complete as possible
- Package needs to be ready and complete so it is ready for the mortgage loan underwriting process
The mortgage processor will make sure that the following is complete:
- two years tax returns are complete and signed
- two months bank statements contains no overdrafts
- if there are overdrafts to notify the loan officer
- make sure that proper letters of explanations are written by the borrower
- LOX explains derogatory credit items and credit inquiries
- get the verification of employment
- get the verification of rent
- get verification of deposit
- perform any other task to make sure that the file is complete for the mortgage underwriter
A good experienced processor will have an immaculate file. Once it is submitted to a mortgage underwriter, the underwriter will have no misunderstanding nor questions. The processor will make the job easier for the mortgage underwriter to render his or her decision.
Mortgage Underwriting Loan Process And Role Of Mortgage Underwriters
Once the loan processor feels the file is complete, the processor will then submit the file to the mortgage underwriting department:
- The file is assigned to a mortgage underwriter
- The underwriter will carefully analyze the package
- Will make sure borrower meets all lending guidelines as well as lender’s overlays
- Once the underwriter is content borrower meets all of the federal lending guidelines and the mortgage company’s own lending requirements, the underwriter will issue a conditional mortgage loan approval
- A conditional mortgage loan approval is that the borrower will get a clear to close once borrower meets all conditions
- Mortgage loan will fund as long as borrower can provide and meet all the conditions on the conditional loan approval
The file then is sent back to the mortgage processor where the processor will contact borrower and explain the conditions borrower will need to provide.
Typical Common Conditions By Mortgage Underwriters
Examples of conditions can be the following:
- updated paycheck stubs
- updated bank statements
- letters of explanations
- missing pages from documents that were initially provided
- not legible documents
- social security card
- drivers license
- missing pages from divorce decree or other documents
- other items underwriter deems necessary in order to issue a clear to close and fund the loan
Once the processor gathers all of the conditions by borrower, the processor will submit all of the conditions in for a clear to close.
Final Submission To Mortgage Underwriter For A Clear To Close
The file is now back in the hands of the mortgage underwriter.
- Mortgage underwriter will check off the conditions
- Once all the conditions have been satisfied, the underwriter will issue a clear to close
- The mortgage company’s closing department will then arrange the closing date with the title company
- The mortgage documents will get sent once the lender has all of the numbers and figures
At closing, the mortgage loan gets funded once the home buyers and home sellers sign the home purchase closing documents.
Mortgage Loan Underwriting Process On Quality Control Underwriting Review
Every mortgage company has a QC Underwriting Review Process where loan application is reviewed by another underwriter to make sure the original underwriter has not missed anything. Some mortgage companies do a QC Underwriting Review prior to the original mortgage underwriter issuing a clear to close. O
Other mortgage companies will do a QC Underwriting Review right after the underwriter issues a clear to close. QC Underwriter will order a third party search through Lexis Nexis and/or Data Verify to make sure there are no public records such as judgments and liens out there that is not showing up on the borrower’s credit report. Once the QC Underwriter feels comfortable and signs off on the mortgage file, the mortgage loan is ready to fund and docs are ready to be sent out to the title company for closing.