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Avoiding Stress During Mortgage Process And Close On Time

Gustan Cho Associates
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Avoiding Stress During Mortgage Process And Close On Time

This BLOG On Ways Of Avoiding Stress During Mortgage Process And Close On Time Was UPDATED On July 8th, 2019

Stress During Mortgage Process
Gustan Cho Associates Mortgage Group

How To Avoid Stress During Mortgage Process

Home Buyers with credit scores of 850 and the following:

  • six-figure paying salary job
  • more than ten years on job
  • solid 20% down payment for your home purchase
  • plenty of reserves
  • never late with any payments
  • have an executed real estate purchase contract

The above type of home buyer going through the mortgage process will normally not stress during mortgage process.

However, it is not always the case scenario:

  • Most home buyers who come to Gustan Cho Associates for help have either been told they do not qualify for a mortgage due to overlays with their current lender or got a last-minute mortgage denial
  • Most of our borrowers at GCA Mortgage Group have gone to multiple mortgage lenders and were told they do not qualify
  • They have gone through stress in the mortgage application process already

Will Bad Credit Affect Mortgage Process

Will Bad Credit Affect Mortgage Process

Not everybody had perfect credit all their life. Many people got hurt from the Great Recession And Real Estate Meltdown of 2008 .

  • Millions of hard-working Americans lost their jobs, lost their businesses, filed bankruptcy, had foreclosures
  • A large percentage of Americans lost all of their life savings
  • Many who retired were forced out of retirement and sought other jobs after the real estate meltdown
  • Millions of homeowners and property owners who owned investment properties with substantial equity in their properties lost it all, literally overnight
  • Many Americans who had professional careers making over six figures a year found themselves unemployed and not marketable in the job market
  • They had to settle for jobs at a fraction of the income they were once making
  • The Great Recession of 2008 wiped out whole industries

Changes In The Mortgage Industry And Qualifying For Home Loans

Changes In The Mortgage Industry And Qualifying For Home Loans

The mortgage industry went through a total overhaul and changes that affected mortgage borrowers:

  • All mortgage loan originators and mortgage companies had to go through rigorous testing and licensing requirements, wiping out half of all loan originators
  • The sub-prime market and companies and workers who were in the sub-prime lending market totally got wiped out
  • Workers had to seek careers in other fields
  • Bankruptcies and Foreclosures hit historical highs
  • The Great Recession of 2008 was the longest lasting recession in U.S. History
  • Some experts swear that it was more of a Depression than a Recession
  • Many have since recovered from the Great Recession of 2008
  • They are ready to start their lives over again and want a second chance of home ownership
  • Many home buyers stress over their past bad history and worry about being able to get a mortgage
  • Many home buyers who want to get pre-approved get different answers by different lenders on why they do not qualify for a home loan
  • After multiple mortgage denials, they find me
  • I tell all my borrowers the straight scoop and not what they want to hear but the facts:
    •  As long as they have documented income, borrowers can have low credit scores and prior bad credit
    • But it is not if they will qualify for a mortgage but when
    • I get everyone who comes to us at Gustan Cho Associates a loan approval if not immediately, shortly after advising them on what they need to do to qualify
    • Those who have very low credit scores or had recent late payments I will work with them to get their credit scores up and re-established and will get them approved
    • We work as partners during the qualifying, processing, underwriting, and closing process

Lenders With No Overlays On Government And Conventional Loans

Lenders With No Overlays On Government And Conventional Loans

Our borrowers at Gustan Cho Associates find us either through a real estate agent referring them, family member or friend referring them or after researching on the internet and finding me online.

  • These folks are already stressed out when they call us
  • After I tell them that I can do their mortgage and get them approved and closed, they are in disbelief and stress during mortgage process until they close on their home loan and get their keys
  • They then break down in happy tears
  • I have so much respect for borrowers who do not take no for an answer and keep on trying until they find a lender who can help them until the dream of home ownership becomes a reality
  • I know too well the stress during mortgage process and on this article, I will advise on ways of avoiding stress during mortgage process
  • It will make the mortgage application and approval process much easier to home buyers

Understand Mortgage Process Is Way To Avoid Stress During the Mortgage Process

Understand Mortgage Process Is Way To Avoid Stress During Mortgage Process

One way I try to help my borrowers avoid stress during mortgage process is by explaining the mortgage application and mortgage approval process when they first call me and we have our first phone interview.

  • I explain that the pre-approval stage  is the most important part of the mortgage application and approval process
  • Most last minute mortgage denials are due to the mortgage loan officer issuing a sloppy quick pre-approval letter
  • The loan officer does not review the two years of tax returns
  • They do not look at unreimbursed expenses and qualify the income improperly
  • Does not thoroughly review the borrower’s credit report and look for public records and other important items on the credit report
  • For example, a typical loan officer will take the mortgage loan application and pull the credit on the borrower
  • The loan officer will just take the borrower’s word on how much income they make and takes the borrower’s word on the overtime income they make
  • The loan originator then pulls the credit on the borrower and sees that the borrower meets the minimum credit score requirement
  • The loan officer then issues a pre-approval letter without thoroughly reviewing the income and the credit report of the borrower

Loan Officers should never issue pre-approvals. They should only issue pre-qualification letters. All pre-approvals at Gustan Cho Associates Mortgage Group are fully underwritten and issued by our mortgage underwriters. Home Buyers should never enter into a real estate purchase contract without a pre-approval letter that has been signed off by mortgage underwriters. This is the number one reason for last minute loan denial and stress during mortgage process.

Are All Pre-Approvals Valid?

Are All Pre-Approvals Valid?

Loan Officers should never issue pre-approval letters. All of our pre-approvals at GCA Mortgage Group at Loan Cabin Inc. are fully underwritten and signed off by our underwriters. This is why we close 100% of all our pre-approvals and our borrowers do not stress during mortgage process.

Here is why home buyers should never enter into a purchase contract without a pre-approval that has been fully underwritten and signed off by a mortgage underwriter:

  • The pre-approved borrower then goes out shopping for a home with the pre-approval letter signed off by a loan officer and NOT underwriter and enters into a real estate purchase contract
  • The loan officer then requests a list of documents he or she needs to collect for the mortgage loan processor
  • The mortgage loan processor then collects the documents such as the following:
    • two years tax returns
    • two years W-2s
    • most recent 30 days paycheck stubs
    • 60 days bank statements
    • then uploads the whole mortgage loan application and submits it to the opening department of the mortgage company
  • Once the opening department registers the mortgage loan applications, then the mortgage loan disclosures and application gets emailed out to borrowers for them to acknowledge it and sign and return
  • Once the lender receives the signed disclosures back the mortgage file is ready to be submitted to underwriting
  • The file waits until a mortgage loan underwriter gets assigned to it

Top Reasons For Mortgage Loan Denials

Top Reasons For Mortgage Loan Denials

Here is what can happen because the loan originator did not qualify home buyers correctly and was not diligent enough prior to issuing the pre-approval letter:

  • Borrowers can have the debt to income ratios exceeded the maximum allowed
    • The loan officer did not take into account the unreimbursed expenses
    • Did not count the 5% of the outstanding collection account balance to count it towards the calculations of the borrower debt to income ratios
    • Did not count child support and/or alimony payments
    • Did not realize that the borrower had not been in a part-time job for two years so the part-time income cannot be counted
    • Did not realize that the borrower did not get a bonus and/or overtime income for two continuous year
    • So the part-time and/or overtime income cannot be counted
    • Had declining part-time and/or overtime income so the mortgage underwriter will not count part-time and/or overtime income

Credit Disputes During The Mortgage Process

Credit Disputes During The Mortgage Process
  • Credit Report:
    • A loan application can go into suspense if the underwriter notices credit disputes on the borrowers’ credit report
    • Credit disputes during the mortgage process will halt the mortgage process
    • Consumers need to retract the credit disputes before the loan application process can proceed
    • However, once a credit dispute is retracted, then the chances are credit scores will drop
    • Borrowers who barely meet the minimum credit score requirements for a home loan may not qualify if the credit scores drop below the minimum credit score requirement after retracting the credit disputes
    • This task should have been done prior to the loan officer issuing a pre-approval letter

Public Records Not Reporting On Credit Report

Public Records Not Reporting On Credit Report
  • Public Records:
    • Loan originators need to check the recorded date of foreclosure and deed in lieu of foreclosure prior to issuing a pre-approval letter
    • There are many times where the reported date on the credit report on a foreclosure or deed in lieu of foreclosure is not correct
    • There are mandatory waiting periods after foreclosure and/or deed in lieu of foreclosure
    • It is not the date when the homeowner turned in their keys to the bank and it is not the date it was reported on the credit bureaus
    • The waiting period start date is the date of the sheriff’s sale and/or the date the deed was transferred out of the homeowners’ name into the name of the mortgage lender
    • This is a very common mistake and when mortgage underwriters catch this during the mortgage process
    • The borrower does not meet the mandatory waiting period after foreclosure and/or deed in lieu of foreclosure, this will turn into a mortgage loan denial

All of the above bullet points are the main reasons why all pre-approvals needs to be fully underwritten and issued by mortgage underwriters and NOT loan officers.

Avoiding Stress During Mortgage Process: Teamwork

Avoiding Stress During Mortgage Process: Teamwork

The first and most important thing in the home loan application process is for the loan originator to thoroughly qualify the mortgage loan application prior to qualifying borrowers.

  • There are many lives at stake on a home purchase
  • The buyers, the sellers, the buyer’s attorneys, the seller’s attorneys, the buyer’s realtors, the seller’s realtors, the title company, the appraiser, the loan processor, the loan underwriter
  • A less than perfect pre-qualification and pre-approval will not just affect the lives of these folks but waste everyone’s time and create stress during mortgage process for everyone, especially the home buyer
  • The home buyer will be making plans in moving, hiring movers, changing schools for their children
  • So will the home sellers
  • There are so many different case scenarios with every loan application
  • This holds true especially for borrowers who had prior bad credit issues and higher debt to income ratios
  • If a loan originator has questions or foresees a potential hurdle in the application, then he or she should have the underwriting department review the file prior to issuing the pre-qualification
  • All  pre-approvals should be issued by mortgage underwriters
  • Loan officers should NEVER issue a pre-approval
  • Borrowers should understand that to avoid stress during mortgage process, teamwork and proper communication with the loan officer is of utmost importance
  • Many times when mortgage underwriters are not clear of lending guidelines, they should consult with HUD and/or Fannie Mae with the loan officer to get clarification

Proper due diligence prior to the issuance of the pre-approval letter is the road to a solid mortgage loan approval and the road to the finish line of closing on the home loan with style and avoiding stress in mortgage process.

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