What Are The Steps In The Underwriting Process?
This Article On The Steps In The Underwriting Process Was Written By Gustan Cho
Steps In The Underwriting Process By Gustan Cho Of The Gustan Cho Team At CrossCountry Mortgage
Understanding the mortgage process can seem overwhelming to those who are not familiar with the process. Often times mortgage loan borrowers enter into the mortgage application process without ever knowing what steps or stages there are in the process of purchasing a home. In this article, we will explore the mortgage underwriting step of the mortgage process. The mortgage underwriting process is where the decision is made of whether or not a borrower gets a mortgage loan approval or a mortgage loan denial. The pre-approval stage is the most important stage of the overall mortgage process and there should be no reason why a borrower who has been properly qualified and pre-approved should not get a mortgage loan approval. Over 70% of my borrowers contact me because of two reasons:
- They have gotten a last minute mortgage loan denial
- They are going through major stress during the mortgage process
There is no reason why the two reason above should happen. The cause of a last minute mortgage loan denial or a borrower going through major stress during the mortgage process is one reason and one reason only. The borrower was not properly qualified. Again, the pre-approval stage in the mortgage process is the most important stage.
Pre-Approval Stage Of The Mortgage Process
The pre-approval stage is the most important phase in the entire mortgage loan process and if the borrower was properly qualified, the steps in the underwriting process should be smooth with no hassles and no stress. The number one reason for last minute mortgage loan denials is due to the mortgage loan originator not issuing a sold pre-approval. The mortgage loan originator needs to not just look at the credit scores whether they meet the minimum credit score requirements but also needs to carefully review the borrower’s credit report and ask the borrower many qualifying questions. Income is the most important factor in determining whether or not a borrower qualifies for a home loan. Here are the main key points in going through steps in underwriting process:
- You can have the highest and most credit in this planet but if you do not have qualified income, there is no way you can qualify for a FHA Loans, VA Loans, USDA Loans, or Conventional Loans.
- However, if you have less than perfect credit and even outstanding collection accounts and charge off accounts and credit scores as low as 580 FICO credit scores but as long as you have documented income and your loan officer has properly qualified you, you can qualify for a mortgage loan.
- Debt to income ratios is another major hurdle many mortgage borrowers face.
- A mortgage loan officer should carefully review the borrower’s tax returns and W2s when determining qualified income and not just take the borrower’s word for it.
- The loan officer should carefully make sure to use the adjusted gross income and take the tax deductions the borrower has declared on their tax returns when qualifying income of the borrower.
Importance Of Processing During Steps In The Underwriting Process
Once you have been have received a Pre-Approval, selected a home, and have a purchase contract, it is time for your loan application to go to the next stage – Underwriting.
- Steps In The Underwriting Process is the stage of the mortgage process in which borrowers often understand the least.
- Let’s start by explaining what happens during this stage.
- Once your file is submitted to the Underwriter, this person begins the process of reviewing everything that was provided during the application process, the AUS results, prospective home, and purchase agreement.
- The role of the Underwriter is to verify all of the information submitted and ensure that it meets all lender and program guidelines.
- Once all information has been reviewed by the Underwriter, providing it meets lender guidelines and program guidelines, he/she will issue an approval, likely a Conditional Approval.
- Conditional Approval means that your loan will receive final approval so long as you meet the conditions outlined by the Underwriter.
Clear To Close Stage Of The Mortgage Process
Once you get a conditional mortgage loan approval, the underwriter is ready to issue a clear to close the mortgage processor collects all the conditions from the borrower. So what conditions are typical for an Underwriter to place on a loan file? Well, there are the obvious ones:
- IRS Tax Transcripts, Social Security Number Verification, Employment Verification, Appraisal, etc.
- For those borrowers that may have abnormal items on their credit report such as a bankruptcy, there will likely be conditions of providing the bankruptcy filing paperwork and discharge paperwork.
- If you have student loans that have been previously deferred, the UW may request account status letters to show the account is in good standing.
- You will also be required to show where down payment funds will be coming from.
- For example, if you have had a large deposit that is not related to your regular income, you will need to provide the source of that deposit.
- If you are receiving gift funds are part of your down payment, you will be required to provide additional documentation to support the gift.
- Once you have satisfied all of the Underwriter’s conditions, your file will be given a Clear to Close.
About The Author Of Steps In The Underwriting Process
Gustan Cho NMLS 873293 is the author of this BLOG on Steps In The Underwriting Process and is the Editor In Chief of Gustan Cho Associates Mortgage And Real Estate Informational Center . Gustan Cho of CrossCountry Mortgage has been a real estate investor for over 20 years and has owned and managed 7 apartment complexes consisting of 3,000 residential units. Gustan Cho like many of us Americans, fell victim to the economic collapse of 2008 and her credit suffered. Gustan did find getting a mortgage difficult and did extensive research in all areas of mortgage lending and found a national lender that did not have any lender overlays and finally got his home loan approved and closed. His hands on experience with the mortgage process motivated Gustan Cho to get his NMLS mortgage loan originator’s license and pursue a career as a licensed mortgage loan originator. Gustan Cho’s passion of helping people realize the dream of home ownership become a reality has motivated him to be the best of the best in the mortgage industry and his short term goal is to hire a team of mortgage loan officers who share the same goals as Gustan.
Gustan Cho is an Area Manager for CrossCountry Mortgage Inc. NMLS 3029, a Fannie Mae, Freddie Mac, Ginnie Mae Direct National Lender known nationally for the following:
- Licensed in 50 states
- Under the leadership of one of the most respected mortgage professionals, CrossCountry Mortgage President and Chief Executive Officer Ronald J. Leonhardt, Jr.
- FHA Loans with no overlays
- VA Loans with minimum credit score requirement of 580 FICO and no overlays
- USDA Loans with no overlays
- Jumbo Mortgages
- Reverse Mortgages
- FHA 203k Rehab Mortgages
- Non-QM Loans
- Conventional Loans no lender overlays
If you have credit scores of under 620 FICO and are looking for a mortgage loan originator who just go off DU/LP Findings per Automated Underwriting System and are looking for a five star national lender licensed in 50 states with no overlays, Gustan Cho NMLS 873293 and The Gustan Cho Team at CrossCountry Mortgage NMLS 3029 is your lender. We are available 7 days a week, evenings, weekends, and holidays. If you have any loan scenario questions, call Gus at 262-878-1965 or text Gustan on his cell for faster response at 262-716-8151. You can also email your mortgage inquiries at email@example.com.