Underwriters Issue Denials

Why Underwriters Issue Denials Is Due To Borrowers Not Qualified

Gustan Cho Associates are mortgage brokers licensed in 48 states

This Article Is About Why Underwriters Issue Denials Is Due To Borrowers Not Qualified

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 Gustan Cho Associates 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.

Top Reasons For Home Closing Delays And Why Underwriters Issue Denials

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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
  • Needing to renegotiate the purchase contract between buyer and seller
  • Home Inspection found flaws with the home
  • Buyers and sellers need to negotiate terms of repairs and/or price
  • The issue with the borrower’s credit that was not reflected on the initial credit report
  • The final walkthrough was not to the satisfaction of the buyer
  • Borrower changed jobs during the 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 the credit report that needs a rapid rescore or credit supplement
  • Delays in the verification of employment from the 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 in the mortgage process. The main reason Why Underwriters Issue Denials is due to loan officers not properly qualifying borrowers. Submitting a file to processing with a borrower who is not qualified is the major reason for loan delays and/or denials. Again, there is no reason why a solidly pre-approved borrower should not just close their home loan but close it on time.

How To Properly Qualify Home Buyers To Avoid Stress During Mortgage Process

Here is the initial pre-approval mortgage stage:

  • Once the borrower consulted with the loan officer, the loan officer completes the mortgage loan application
  • The loan officer runs credit and reviews the overall credit report from all three credit bureaus

Loan officer requests required mortgage documents such as the following:

  • tax returns
  • W2s, paycheck stubs
  • bank statements
  • divorce documents if applicable
  • bankruptcy paperwork if applicable
  • child support paperwork if applicable
  • any other pertinent documents

How The Loan Officer Qualify Borrowers To Avoid Why Underwriters Issue Denials

How To Properly Qualify Home Buyers To Avoid Stress During Mortgage Process

Loan officer cross-references documents provided with a mortgage application and credit report:

  • The loan officer will run the borrower’s file through the Automated Underwriting System
  • Hopefully will get an approve/eligible per AUS
  • Loan officer reviews AUS FINDINGS
  • Looks for conditions and sees if the borrower can meet all conditions from automated findings
  • Borrowers  signed loan application
  • Disclosure package is then submitted to the opening department and gets assigned to a mortgage processor
  • The mortgage processor will scrub the 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 documents are in order.

Importance Of Documents

Make sure to have all the necessary supporting documents such as:

  • W-2s
  • income tax returns
  • real estate purchase contracts
  • appraisal
  • tax information
  • insurance bills for refinances
  • paycheck stubs
  • credit reports
  • and all other necessary documents

The processor completes the package:

  • If there is missing information that is needed, the processor will contact you
  • It is so very important to submit the processor’s request as soon as possible
  • Otherwise, your loan application will be delayed

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:

  • Mortgage underwriters role is to make sure everything in the loan application package is complete
  • The underwriter 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
  • The underwriter will only issue a conditional loan approval if the underwriter sees that the borrower meets all the necessary guidelines

Although lenders need to make sure borrowers conform to standards set by government agencies, Fannie Mae, or Freddie Mac:

  • Mortgage guidelines vary depending on the terms of each loan

In general, approval is based on two factors:

  • ability and willingness to repay the loan
  • value of the property

Conditional Loan Approval And Why Underwriters Issue Denials

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. Both the processor and loan officer will get to work in gathering all conditions. Once all of the conditions have 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. The processor needs to get them and submit the additional conditions to the underwriter. Most underwriters will work with borrowers to get them approved. They have no intention on why underwriters issue denials.

The Final Process Prior To A Clear To Close

The underwriter then approves the loan and gives 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 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 us at Gustan Cho Associates at 800-900-8569 or text for a faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, on evenings, weekends, and holidays to answer any questions or go over case scenarios.

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