This Article Is About Steps In Mortgage Pre-Approval Process Leading To Home Closing
Understanding the mortgage process can seem overwhelming to those who are not familiar with the overall mortgage loan process.
- Often times, borrowers enter into the mortgage loan process without ever knowing what steps in mortgage pre-approval process
- Or stages there are in the steps in mortgage pre-approval process of purchasing a home
In this article, we will explore the Steps In Mortgage Pre-Approval process.
- In my previous article, “Steps In The Mortgage Application Process” we discussed items that would be required as part of the mortgage application process
- Once you have provided the required application documentation and a credit report has been obtained, your Mortgage Loan Officer will go to work using the automated underwriting system to pre-approve the mortgage application
Steps In Mortgage Pre-Approval Process: What Is A Pre-Approval?
The pre-approval stage is hands down the most important stage of the entire mortgage process and the main reason for a last minute mortgage loan denial is because the pre-approval was not issued correctly. Here are some important check points:
- There is more to just looking at the credit scores to see if the borrower meets the minimum credit score requirements or just looking at the paycheck stubs to see how much the borrower makes
- A competent diligent loan officer will carefully review the borrower’s overall credit history on their credit report, question any potential erroneous credit tradelines or credit items, review the borrowers tax returns and make sure that the lender they are employed by does not have any particular lender overlays that may pertain to the borrower he or she is currently qualifying
- Borderline mortgage applicants should always be submitted to the automated underwriting system for an automated approval prior to issuing a pre-approval
- There is no reason why any loan who has been solidly pre-approve for not to close
- What exactly is a pre-approval and what does it mean?
- A pre-approval comes after all application documentation has been reviewed, the loan application has been submitted to an automated underwriting system (AUS), and careful review of the AUS results
- AUS can provide different responses based on the information entered, but the most favorable response is “Approve/Eligible”
- This is stating that the loan application is approved as long as the conditions listed are met and that it is within or meets the program guidelines
Steps In Mortgage Pre-Approval Process: Automated Underwriting System
Both Fannie Mae and Freddie Mac have their own version of the Automated Underwriting System, often referred to as AUS. Both Fannie Mae and Freddie Mac Automated Underwriting System works as follows:
- The Automated Underwriting System is a sophisticated computer system where it analyzes the borrower’s credit scores, credit history which includes public records, income, assets, and the borrower’s disclosures
- Within seconds, the Automated Underwriting System will render its decision
- Most lenders will have overlays which are additional mortgage requirements that are in addition to the minimum mortgage lending guidelines by the particular loan program such as FHA, VA, USDA, Fannie Mae, and Freddie Mac
Once a Loan Officer obtains the AUS Approve/Eligible results, they will then be able to issue the Pre-Approval letter within the limits outlined by the underwriting system.
- It is important that your Loan Officer takes a little time examining your entire file, anticipating those items that may come into question by the Underwriter, and closing any gaps in advance of the issuance of the Pre-Approval letter
- By doing so, this will ensure that your pre-approval is solid and that your loan will go through to the closing process
About The Author
Alex Carlucci is An Associate Contributing Editor and Senior Vice President Of Gustan Cho Associates Mortgage And Real Estate Information Center and a mortgage loan originator. The Gustan Cho Team at Gustan Cho Associates are experts on FHA, VA, USDA, Conventional Loans, Reverse Mortgage, FHA 203k Loans, Non-QM Loans, and alternative financing loan programs. Gustan Cho Associates is a one-stop lending shop and specializes in originating and funding government and Fannie/Freddie mortgages with no lender overlays. As long as you, as the borrower, can get an approve/eligible per DU FINDINGS and/or LP FINDINGS, and can satisfy the conditions on the automated findings, you can rest assured that your FHA Loan will close. Gustan Cho Associates are mortgage bankers. We can originate, fund, and service FHA, VA Loans, USDA Loans, and Conventional Loans with no lender overlays. Gustan Cho Associates is available to take your phone call 7 days a week and answer any questions you may have an issue you a pre-approval letter. We are available 7 days a week, evenings, weekends, and holidays. Please contact us at 800-900-8569 or text us for faster response. Or email us at email@example.com.
July 16, 2019 - 4 min read