Loan Officer Training On Qualifying Borrowers For Mortgage

Advice For Loan Officers On Qualifying Borrowers For Mortgage

There are many steps in the mortgage process from the time of application to closing. Qualifying borrowers for mortgage on the first call is one of the most important steps in the overall mortgage process. Most borrowers are new to the mortgage process even though they may have gone through it many times before. It is not often where a person buys a home or goes through a refinance. Another thing about the mortgage industry is that it is constantly changing with new rules and regulations where even veteran loan officers who have been in the business for many years and take a few years off have to start from scratch. There are too many steps in the mortgage process to explain with one blog so we will be writing a series of the mortgage process on Gustan Cho Associates Mortgage & Real Estate Information Resource Center. On this blog, we will cover the steps that lead to an approve/eligible per automated underwriting system findings. Some lenders like myself who have little to no lender overlays will just go off the automated findings of the automated underwriting system and as long as the borrower can meet the conditions of the automated approval, there should be no hiccups and the loan should close.

Qualifying Borrowers For Mortgage With Initial Phone Interview

The initial phone interview is very important. A Loan Officer should have a note pad and pen and these are the following questions the loan officer should ask the borrower on the first phone interview.
  1. What state are you calling from?
  2. How much are the homes that you are interest in buying? Can you give me the tentative ball park figure of the property taxes that the homes you are shopping for are? How much are the annual homeowners insurance premiums? Are there homeowners association dues on homes that you are shopping? Are the properties you are looking at in a flood zone and if so, how much are the flood insurance premium? These are important questions that will impact your debt to income ratios when qualifying borrowers for mortgage.
  3. How many borrowers will be on the loan? Ask if the both borrowers are employed, if husband and wife, and if one of the borrowers are not employed, do not use them as co-borrower because of no income. Both borrowers do not have to go on the loan and they can go on title.
  4. Ask them what they do for a living? Do they work full time? Do they get social security? Do they get child support and if they do, find out the ages of the children. Reason you ask the age is because child support income needs to continue for the next three years to be used as qualified income. If a child is 17 years old and the borrower gets child support income, that income cannot be used because most states child support stops once the minor turns 18 years old. Social security income can be grossed up 15%. Part time income, bonus income, and a second full time job income can be used if the borrower had a two year history of receiving that income and the likelihood of a three continuation of that income is likely. 1099 and self employment income can be used if and only if the borrower had two years history of receiving such income.
  5. Ask them about debts: First and foremost, the biggest debt they will have are car loan payments and student loan payments. Ask them if they have an auto loan or auto loans and how much their monthly payments are. Ask them how much their student loan balance is. Ask them how much their monthly payment is. If the student loan is in deferment, then 1% of the student loan balance will be used as a monthly debt UNLESS they can get a written monthly payment statement from the student loan provider stating what the monthly student loan payment, amortized, if the student loan were to be out of forbearance. Ask them on all other monthly debt obligations.
  6. Ask them about collection accounts with outstanding balances: You do not have to pay off outstanding collection accounts and charge offs to qualify for a FHA Loan, however, you do have to take into consideration outstanding collection accounts that total more than $2,000 in unpaid balances because you need to take 5% of the outstanding collection account balance and use it as part of the borrowers monthly debt.
  7. Ask them if they have any outstanding judgments and/or tax liens. You can qualify for FHA Loans with outstanding judgments and/or tax liens, however, you need to have a written payment agreement with the judgment creditor and/or the Internal Revenue Service and have three months of payments and provide the lender three months of canceled checks and/or bank statements showing that you have made three consecutive on time payments. You cannot prepay the whole three months upfront.
  8. Ask them about their credit cards. Ask them about what each credit card limit is and what they owe on each credit card balance and what the monthly payments are. This question is important because if the borrower has lower credit scores due to maxed out credit cards, paying down credit card balances can skyrocket the borrower’s credit scores.
  9. Ask them if they know what their credit scores are. Most people we deal with have had credit issues and over 70% of our borrowers are folks who got denied at the last minute by other lenders or could not qualify by other lenders so they know what their credit scores are. If they have a copy of a tri-merger credit report from a mortgage company that was pulled recently, have them email it to you so you can do a quick review on it before running a new credit report and avoid dinging their credit scores.
  10. Ask them about their credit profile. Have they filed bankruptcy? Have they had a foreclosure and if so, when was it and when was the recorded date of the foreclosure and/or sheriff’s sale date. If short sale, when was the date of the short sale.
  11. Ask them about late payments after bankruptcy/deed in lieu of foreclosure/foreclosure/short sale and if they had any late payments after bankruptcy and/or foreclosure . Most lenders WILL NOT APPROVE any borrowers with any late payments after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale. The Gustan Cho Team will accept borrowers with lates after Bankruptcy and Foreclosure if they are able to get an approve/eligible per Automated Underwriting System but again, it depends on the circumstances. Sometimes it is best to refer borrowers with lates after a bankruptcy and/or foreclosure to our credit repair partner, Credit Fix Advisors to correct the late payments.
  12. If the loan officer seems that the borrower meets the initial mortgage qualification requirements, then they can directed to their online mortgage application website. For example, once the borrower pass the initial mortgage interview with me, I will direct them to www.phmc.com/gustancho and have them complete the APPLY NOW mortgage application.
  13. Once the borrower completes the online mortgage loan application, I will get an email alert and we then proceed to the next step with the  mortgage application process.

Second Step In Qualifying Borrowers For Mortgage

Once the borrower has applied online and you have gotten the email alert through the mortgage CRM, the next step is to pull a tri-merger credit report of the mortgage borrower. Make sure you log in all of your borrowers information on the CRM system such as the borrowers social security number, name, date of birth. Thoroughly review the borrowers credit scores, credit report, payment history, and pay special attention that the borrowers do not have any credit disputes on their credit report with derogatory credit tradelines on non-medical collection accounts with aggregate total of $1,000 or more and charge off accounts. Credit disputes on medical collections and non-medical collections with zero balance is allowed and exempt from credit disputes.

IF CREDIT SCORES MEET MINIMUM CREDIT SCORE REQUIREMENTS AND IF YOU HAVE REVIEWED THE Credit Scores Versus Credit Report YOU CAN THEN PROCEED TO THE NEXT STEP OF THE MORTGAGE PROCESS.

Third Step In Qualifying Borrowers For Mortgage: Send Out Mortgage Questionnaire

The third step in qualifying borrowers for mortgage is to send out a one page mortgage questionnaire for them to complete and once they return it, you can run the mortgage file through the Automated Underwriting System. Below is the list of questions the borrowers need to answer:

 Let me know if you have any questions.  Feel free to reply to this email and place your answers below
Here are the questions that need answered in order to move forward with the mortgage process:
  1. Number Of Years Of Schooling For Borrower And Co-Borrowers
  2. Number of dependents listed on the Federal Income Taxes, if any, I need their ages;
  3. Email address for both (If married. you can use the same one if you wish);
  4. What county is the property you are looking to purchase located in?
  5. How long have you been at your current address?
  6. If not 2 yrs or more, please provide additional addresses to cover that time period.
  7. Do you get mail at the physical address? if NO; what is your mailing address;
  8. Are you self-employed?
  9. Name and address of employer:
  10. What is their address:
  11. What is the phone number of the borrower and cell number and best number to be contacted:
  12. What is the position of their current job;
  13. What type of business or industry is the borrower employed?
  14. How long has the borrower been employed at their current job?
  15. If not 2 years please provide all employment information and gaps in employment above to cover a 2 year period.
  16. Need to provide how many years in the same line of work, especially in the past two years?
  17. If the borrower is an hourly wage earner, how much per hour, amount of hours worked per week, and if borrower receives overtime, bonus income, has they had that income in the past two years. If borrower is salaried employee, how much is the annual salary and if they receive bonuses how much bonus do they receive and have they received bonus for the past two years?
  18. If borrower has part time income many hours per week do you work and have you worked part time the past two years and is the part time income likely to continue the next three years?
  19. If you are a renter, what is your current rent amount and do you pay by check. If you do, do you have 12 months canceled checks and/or 12 months bank statements?
  20. Names and addresses of banks or other institutions where you hold asset accounts?
  21. Bank Name:
  22. If more than one, break down balances for each below and list specific bank
  23. Checking Account Balance:
  24. Savings Bank Account Balance:
  25. Any retirement accounts? (401K, IRA, etc)
  26. Where is the account held:
  27. What is the vested balance:
  28. Are you a US citizen?
  29. If you already own property please;
  30. List the address(es) of the property:
  31. Year the property was purchased:
  32. Approximate value of the property if you were to sell it today:
  33. What mortgage company do you have the first lien and if you have a second mortgage what is the name of the second mortgage company name:
  34. Annual property taxes of the properties that you own:
  35. Annual Insurance premiums on all of the properties that you own:
  36. Rent Amt Collected on the rental properties that you own:
OPTIONAL:
  • Government Monitoring;
  • I do not wish to furnish this information(place X here >)
  • are you Hispanic/Latino:
  • what race do you claim:
  • what sex do you claim:

Once the borrower returns the above mortgage questionnaire form, the file is now ready to be submitted to Fannie Mae/Freddie Mac Automated Underwriting System for an automated approval.
After You Get An Approve/Eligible Per Automated Underwriting System.

Next Step After Automated Underwriting System Approval

Once you get an automated underwriting system mortgage loan approval, the next step for the loan officer is to request all of the DOCUMENTS REQUIRED TO PROCESS LOAN . Documents Required To Process Loan needs to be carefully reviewed by the loan officer and make sure that there are no missing pages on bank statements, tax returns, divorce decree, bankruptcy paperwork, child support/alinomy paperwork. Any missing pages on mortgage docs can mean delays in the mortgage process.

Docs gathered need to be uploaded to each designated corporate site. After all docs have been uploaded, a pre-approval letter can be issued. The Gustan Cho Team is extremely careful in reviewing all docs prior to issuance of a pre-approval letter. Once a pre-approval letter has been issued, that means that we are confident that the loan will close and close in time.

Real Estate Purchase Contract

After the pre-approval letter has been issued by the loan officer, the home buyer will go out and shop for a home. Once the buyer decides on entering in Real Estate Purchase Contract the home buyer will email the executed real estate purchase contract to the mortgage loan officer. With the executed real estate purchase contract, the mortgage process is about to begin.

Start Of The Mortgage Process

Corporate headquarters will send the Initial Electronic Mortgage Disclosures to the borrower via email. The borrower will need to acknowledge the initial electronic mortgage loan disclosures and the Intent To Proceed is uploaded. The borrower’s mortgage application package will be assigned for processing and a mortgage processor will be assigned to the borrower. The mortgage processor will order the appraisal which should be completed in about a week so prior to submitting the file to underwriting, the home appraisal with be complete and back to the mortgage underwriter. The mortgage processor will be in contact with the loan officer and with work together in scrubbing the file until the file is totally prepped up for underwriting. Once the mortgage processor deems it complete, the file is then submitted to the underwriting department for the mortgage approval process. A mortgage loan underwriter is assigned to the borrower’s mortgage file and a conditional approval should be issued within 24 to 48 hours upon receipt of a mortgage underwriter.

Conditional Mortgage Loan Approval

Upon getting a conditional mortgage loan approval, the mortgage processor, the loan officer, and the borrower need to get to work to gather all of the line items listed on the conditional mortgage loan approval. Once the mortgage processor has gathered all of the line items listed on the conditional loan approval, the processor then submits the mortgage conditions back to the mortgage underwriter for a clear to close. A clear to close is when the underwriter has deemed the file complete and gives it a thumbs up for the mortgage lender to close the loan.

Once clear to close is issued, file goes in line for closing disclosure. Once closing dept and closing company have the numbers figured out it will be sent to the borrower. Once acknowledged they will have 3 business days to wait to sign loan docs.

Clear To Close And Closing

Once the borrower is issued a clear to close, the title company goes to work and prepares the Closing Disclosures where they get figures from both the borrowers and sellers side of the transaction. The actual figure, cash to close, from the borrower is figured out at this time and the borrower needs to wire the appropriate funds to the title company. Under TRID MORTGAGE REGULATIONS, there is a three day waiting period to close on a home loan from the date of the clear to close. At closing, both sellers and buyers sign closing docs and the lender wires the funds to close and the borrower gets the keys to their home.

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.

Comments are closed.