Mortgage Pre-Approval Process
This Article On The Mortgage Pre-Approval Process Was Written By Gustan Cho NMLS 873293
The mortgage pre-approval process is the most important phase of the mortgage process. The number one reason why mortgage loan borrowers go through stress during the mortgage process and the reason for last minute loan denials is due to not being pre-approved correctly or because the loan officer issued a hasty pre-approval without properly doing his or her due diligence.
Request For Fast Pre-Approval Letter During Mortgage Pre-Approval Process
There are many borrowers who want a pre-approval within minutes of getting pre-qualified. However, if you want your loan process to go smoothly and not stress during your mortgage process, then you need to cooperate with your loan officer and make sure that the loan officer has all grounds covered. Here is how the mortgage pre-approval process should proceed:
- Once he or she has all your information and documents, the loan officer is able to run it through Fannie Mae’s Automated Underwriting System called Desktop Underwriter (DU), and/or Freddie Mac’s Loan Prospector (LP).
- An automated approval does not guarantee that your loan will close.
- Borrowers need to understand that DU or LP will only go by the information that is listed on the mortgage loan application and the items reporting on the credit report.
- Credit reports may contain errors.
- There is no reason why a pre-approved borrower should go through stress during the mortgage process or why the loan should not close if the loan officer has pre-approved by borrower properly.
- Some loan officers are more diligent than others.
- Unfortunately, there still are loan officers will just issue a pre-approval without looking at all of the documents provided by the borrower and this often leads to potential issues during the mortgage process.
- Unfortunately, there still are loan officers will not even ask for documents and issue a pre-approval which is asking for potential trouble during the mortgage pre-approval process.
- A loan officer should carefully review the borrower’s two years of tax returns and pay special attention to the borrower’s unreimbursed expenses.
- Tax returns for self-employed borrowers are averaged for the past two years; however, if the most current year’s tax returns show a significant decrease in income, most underwriters will not average the two years but will only average the year with the lower income.
- If the borrower needs overtime income, bonus income, or other income to qualify for the loan, the loan officer should get a verification of employment prior to issuing a pre-approval letter.
Public Records Not Reflected On Credit Report
Loan Officers should also question the borrower to determine if he or she has any public records such as judgments and/or tax liens that the borrower knows about but is not reporting on the credit report. Many people who go to credit repair can have derogatory items removed and deleted off all reports from the three major credit bureaus. This will work for outstanding collection accounts, late payments, charge-off accounts, and even car payments or installment payments and the borrower can get away with it. However, ALL PUBLIC RECORDS not on the credit report will be discovered by your mortgage lender because all mortgage lenders will hire a third party public records search company, usually DATA VERIFY or LEXIS NEXIS, and any public records such as judgments, bankruptcies, foreclosures, short sales, tax liens, federal student loans, and delinquent child support/alimony payments will be discovered prior to a clear to close.
Sixty days of bank statements are required and your loan officer should pay attention for overdrafts in the past 60 days and/or any overdraft fees on your bank statements. If you have overdrafts in the past year but do not have overdrafts in the past 60 days, then an astute loan officer will tell you to go to the bank and get him 60 days of bank printouts that are signed, stamped, and dated by the bank teller. Year-to-date overdraft fees are reported on the actual bank statements but they are normally not reported on computer bank statements provided by the teller. Proof of funds needs to be provided for the down payment. Closing costs can be covered either by a sellers’ concession or by a lender credit from your mortgage lender in lieu of a higher interest rate. Your loan officer should carefully review your credit report and make sure that you do not have any credit disputes on non-medical collection accounts for which the aggregate balance exceeds $1,000, or on any charge-off accounts. Credit disputes are not allowed on non-medical collection accounts when the total outstanding balance of your unpaid collection exceeds $1,000 or on any charge off accounts. You can have credit disputes on non-medical collection accounts with zero balances or on medical collection accounts. Removing your credit scores will drop your credit scores, so borrowers who barely meet the minimum credit scores for a FHA loan or conventional loan (580 FICO for FHA and 620 FICO for conventional) and have credit disputes may no longer qualify once they retract those credit disputes.
Not telling the whole truth to your loan officer is a fundamental mistake because the mortgage business is extremely regulated and everything will be verified—and the mortgage lender will find out. Your loan officer is on your side and will do everything possible to make the deal happen, but her or she needs your cooperation.
Once your loan officer has reviewed your mortgage application, reviewed your credit scores, reviewed your credit report, reviewed your income docs, reviewed your bankruptcy and foreclosure paperwork if applicable, reviewed your divorce decree if applicable to see if you are obligated to pay and/or receive child support/alimony, and every other potential item a mortgage underwriter may question, then the borrower will be deemed as pre-approved and a pre-approval letter should be issued. The mortgage pre-approval process should not take long. But, ultimately, how long it takes depends on how fast the borrower can get all of the required documents to the loan officer.
How Solid Is Your Mortgage Pre-Approval?
Over 75% of borrowers who contact us at The Gustan Cho Team at CrossCountry Mortgage are the following folks:
- Borrowers who were told they have been denied for a mortgage loan
- Borrowers who got a conditional loan approval and keep on getting asked for more conditions after conditions
- Loan Officers who are not calling borrowers back in a timely fashion
- Borrowers who are getting runarounds by their loan officers
- Borrowers who have loan officers and lenders who have total disregard of their closing dates and the mortgage process is going on beyond 30 plus days
There is no reason why a pre-approved borrower should not be able to close their mortgage loan in 30 or less. The only reason for a last minute mortgage loan denial or stress during the mortgage process is due to the following reasons:
- Loan officer did not properly qualify borrower
- Loan officer did not know their lending guidelines
- Loan officer did not know their lender overlays
If you are a borrower and are going through a stressful loan process and need a second opinion or a lender with no overlays to take over your loan process, please contact Gustan Cho at 262-878-1965 or text Gustan Cho on his cell at 262-716-8151. You can email us at email@example.com. We are available 7 days a week, evenings, weekends, and holidays.