The mortgage underwriting phase is what determines whether your mortgage loan application is approved or not. Mortgage underwriters are the people that goes over the whole mortgage application package and determine whether or not the mortgage loan borrower meets the mortgage lenders lending guidelines. Mortgage underwriters will review your mortgage loan application and your documents such as pay check stubs, two years tax returns, 60 days bank statements, and other documents such as bankruptcy papers, foreclosure paperwork, divorce decree, child support payment agreements, and social security and/or pension award letters. Once the mortgage underwriter reviews your mortgage application, mortgage loan documents, and credit report, the mortgage underwriter will render a decision.
Mortgage Underwriting Errors
Mortgage underwriters are human and do make errors. If you got issued a mortgage loan denial, there will be a reason why the mortgage underwriter issued a mortgage loan denial. Most experienced mortgage loan originators will not submit a mortgage loan application if they did not feel confident that they will get a mortgage loan approval. Prior to a mortgage loan denial, most mortgage loan underwriters will contact the mortgage loan originator to warn them that they will deny a mortgage loan application due to certain reasons. Other mortgage loan underwriters will just plain deny the mortgage loan without warning. It depends on the mortgage lender and also depends on the mortgage loan underwriter.
Reasons For Mortgage Loan Denials
Most common reasons for mortgage loan denials are due to high debt to income ratios. Mortgage loan originators need to qualify income and make sure that the mortgage loan applicant meets the required debt to income ratios. If a mortgage loan originator qualifies a mortgage loan applicant at a certain income but the mortgage loan underwriter comes up with a different figure, then the debt to income ratios required can be out of compliance and the mortgage loan underwriter can deny the mortgage loan application. Income is one of the biggest mortgage underwriting errors in the mortgage industry. Mortgage underwriting errors on income can be that the mortgage underwriter did not calculate overtime, part time, and bonus income correctly.
Common Mortgage Underwriting Errors
As discussed on the prior paragragh, one of the biggest mortgage underwriting errors is income qualified by mortgage underwriters. Overtime, part time, and bonus income can count as income as long as the mortgage loan applicant has a two year history of overtime, part time, and bonus income and the likelihood is likely to continue for the next three years.
However, some mortgage underwriters make mortgage underwriting errors where they do not count overtime, part time, and bonus income because the income is decreasing. Instead of looking further for the reason of declining income, they just wipe it off and not count it at all. Decreasing overtime income, part time income, and bonus income can be used as long as there is a good explanation of declining income due to time off work. Another common mortgage underwriting errors is when a borrower changes jobs from part time to full time. If you change job status from part time status to full time status, you can use the new full time income to qualify for your mortgage loan. Unfortunately, many mortgage underwriters still make the error of averaging the two years of income, both part time and full time income, and using the combination of the part time income and full time income as the borrower’s monthly gross income. Mortgage underwriting errors like these happen all of the time and your mortgage loan originator needs to point this out to the underwriter and if the underwriter does not change her decision needs to take this matter up with the mortgage lending institution’s management staff or the mortgage underwriting manager.
Are Mortgage Underwriting Errors Common
As previously mentioned, mortgage underwriters are human and do make mistakes. If you get a mortgage loan denial by a mortgage loan underwriter, go over the reason for the mortgage loan denial and if there are mortgage underwriting errors, make sure you send an rebuttal with supporting documents and a strong detailed letter of explanation.