Why Underwriters Issue Denials And Stress During Mortgage Process
This BLOG On Why Underwriters Issue Denials Was Updated On March 13, 2017
The mortgage process should not be a stressful process and there is no reason why a mortgage loan should not close after a pre-approval has been issued. All mortgages should close on time and The Gustan Cho Team at CrossCountry Mortgage has a 21 day close policy on most loans. Delays can and often due occur and the main reason for closing delays is due to borrowers not having proper documents submitted to their loan officer in a timely manner.
Here are the reasons for closing delays during the mortgage process:
- Borrowers not submitting necessary Mortgage Documents Required
- Missing pages or items on documents provided
- Home Appraisal not coming in at value and needing to renegotiate the purchase contract between buyer and seller
- Home Inspection found flaws with the home and buyers and sellers need to negotiate terms of repairs and/or price
- Issue with borrower’s credit that was not reflected on the initial credit report
- Final walk through was not to the satisfaction of buyer
- Borrower changed jobs during mortgage process
- Borrowers cannot document irregular deposit and/or withdrawal
- Other minor issues discovered by the mortgage underwriter during the mortgage process
- Error or errors on credit report that needs a rapid rescore or credit supplement
- Delays in verification of employment from employer
- General contractor delays on FHA 203k Loans
- Higher debt to income ratio than expected
Initial Mortgage Process
The pre-approval stage is the most important step of the mortgage process. The main reason Why Underwriters Issue Denials is due to loan officers not properly qualifying borrowers and submitting a file to processing with a borrower who is not qualified. Again, there is no reason why a solidly pre-approved borrower should not just close their home loan but close it on time. Here is the initial pre-approval mortgage stage:
- Once the borrower consulted with the loan officer, the loan officer completes the mortgage loan application.
- Loan officer runs credit and reviews the overall credit report from all three credit bureaus.
- Loan officer request required mortgage documents like tax returns, W2s, paycheck stubs, bank statements, divorce documents if applicable, bankruptcy paperwork if applicable, child support paperwork if applicable, and any other pertinent documents.
- Loan officer cross references documents provided with mortgage application and credit report.
- Loan officer will run borrower’s file through Automated Underwriting System and hopefully will get an approve/eligible per AUS.
- Loan officer reviews AUS FINDINGS and looks for conditions and sees if borrower can meet all conditions from automated findings.
- Borrowers signed loan application and disclosure package is then submitted to the opening department and gets assigned to a mortgage processor.
- Mortgage processor will scrub whole file, order verification of deposit, verification of employment, and verification of rent.
- Once the mortgage processor sees that the file is complete, the file is then submitted to the underwriting department and a mortgage underwriter is assigned to the file.
- The loan processors make sure that all of your documents are in order and that you have all the necessary supporting documents like W-2s, income tax returns, real estate purchase contracts, appraisal,tax and insurance bills for refinances, pay check stubs, credit reports, and all other necessary documents.
- The processor completes your package and if there are missing information that is needed, the processor will contact you.
- It is so very important that you submit the processor’s request as soon as possible, otherwise, your loan application will be in suspense.
- Once the processor has all the necessary documents and completes the file, the processor then submits it to the lender to underwrite the loan.
Mortgage Underwriting Process
The underwriter does his or her own checks and balances and makes sure everything in the loan application package is complete and does a third party public records search through Core Logic, Data Verify, or Lexis Nexis. If a file is neat and complete, the mortgage underwriter will issue a conditional loan approval if the underwriter sees that the borrower meets all the necessary guidelines.
Although lenders conform to standards set by government agencies, loan approval guidelines vary depending on the terms of each loan. In general, approval is based on two factors: your ability and willingness to repay the loan and the value of the property.
Conditional Loan Approval
Once a mortgage underwriter feels that the borrower meets all of the lending guidelines, the underwriter will issue a conditional loan approval. The conditional loan approval will be sent to the loan processor where both the processor and loan officer will get to work in gathering all conditions. Once all of the conditions has been gathered, it is submitted to the mortgage underwriter for a clear to close. The underwriter will check off on the conditions and normally will issue a clear to close. A clear to close means that the loan is ready to fund and docs should be prepared. On rare occasions, a mortgage underwriter may add a few more conditions and the processor needs to get them and submit the additional conditions to the underwriter. Most underwriters will work with borrowers to get them approved and have no intention on why underwriters issue denials.
The underwriter then approves the loan and give you a clear to close, which is the final step in the loan process. So if the borrower is properly qualified, there is no reason why underwriters issue denials. I do not remember on why underwriters issue denials on the many files that I submitted.
If you are in need of a fast pre-approval, please click APPLY NOW FOR MORTGAGE PRE-APPROVAL or contact me at email@example.com or call me at 262-878-1965 or text Gustan on his cell at 262-716-8151 for faster response. My team and I are available 7 days a week, evenings, weekends, and holidays to answer any of your questions or go over case scenarios.