Understanding The Mortgage Loan Underwriting Process

How Does The Mortgage Loan Underwriting Process Work?

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 loan 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 the mortgage borrower and is when the mortgage lender is ready to send closing documents out to the title company and fund the mortgage loan.

The mortgage loan underwriting process starts after the mortgage loan originator issues the pre-approval letter and once the home buyer submits the executed real estate purchase contract along the required documents such as 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, and any other documents that the mortgage loan originator may deemed necessary. The mortgage 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.

Mortgage Processing

Once the mortgage loan officer has accumulated all of the necessary documents by the mortgage loan borrower, the mortgage loan officer will then submit the mortgage documents, mortgage loan application, and credit reports to the mortgage processing department. The mortgage file gets assigned to a mortgage loan processor . The mortgage processor’s job is to make sure that all of the documents that the mortgage loan originator has received by the mortgage loan borrower is as complete as possible so the mortgage loan package is ready for the mortgage loan underwriting process. The mortgage loan processor will make sure that the two years tax returns are complete and signed, that the two months bank statements contains no overdrafts and if there are overdrafts to notify the loan officer, make sure that proper letters of explanations are written by the borrower which explains derogatory credit items and credit inquiries, get the verification of employment, get the verification of rent, get verification of deposit, and perform any other task to make sure that the file is complete for the mortgage loan underwriter. A good experienced processor will have an immaculate file where once it is submitted to a mortgage loan underwriter, the underwriter will have no misunderstanding nor questions and make the job easier for the mortgage loan underwriter to render his or her decision.

Mortgage Underwriting Loan Process: Mortgage Underwriter

Once the mortgage loan processor feels the mortgage loan file is complete, the processor will then submit the file to the mortgage underwriting department and the file is assigned to a mortgage loan underwriter. The mortgage underwriter will carefully analyze the mortgage package and make sure that the mortgage borrower meets all mortgage lending guidelines as well as the mortgage lender’s overlays. Once the mortgage loan underwriter is content that the mortgage 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 and the mortgage loan will fund as long as the borrower can provide and meet all the conditions on the conditional loan approval. The file then is sent back to the mortgage loan processor where the processor will contact the mortgage borrower and explain the conditions that the borrower will need to provide. Examples of conditions can be updated paycheck stubs, update bank statements, letters of explanations, missing pages from documents that were initially provided, title, appraisal, not legible documents, social security card, drivers license, missing pages from divorce decree or other documents, and other items that the mortgage loan underwriter deems necessary in order to issue a clear to close and fund the loan.

Once the mortgage loan processor gathers all of the conditions by the mortgage loan borrower, the processor will submit all of the conditions in for a clear to close.

The file is now back in the hands of the mortgage loan underwriter and the mortgage loan 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 where 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.

Quality Control Underwriting Review

Every mortgage company has a QC Underwriting Review Process where the mortgage loan application is reviewed by another mortgage loan underwriter to make sure the original mortgage loan underwriter has not missed anything. Some mortgage companies do a QC Underwriting Review prior to the original mortgage underwriter issuing a clear to close while other mortgage companies will do a QC Underwriting Review right after the mortgage 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.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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