We are back to basics when it comes to mortgage underwriting. Lately it seems like underwriters are asking for things we haven't needed in a few years!! To make it easier on you when it comes to underwriting, make sure you give your loan officer everything they ask for. The basics are cash, credit, income and property.
Income is probably the most important. We need to verify 2 full years of employment. Every w-2 has to be accounted for. Make sure you give your loan officer all of your income history. If there is a gap of employment, you will need to write a letter to explain it. If the gap is over 6 months, you may need to be on your new job for a minimum of 6 months before you can get a new mortgage. Because most lenders are pulling your tax transcripts with the 4506T, make sure you give accurate information to your lender. If your spouse is self employed and there is a loss on the tax returns due to that job position, we have to account for the loss even if your spouse is not on the new loan. We have to show that the income we are using will continue for three years, so if you currently get child support and it will not continue for three years, we can't use it.
Credit is next. Your credit score will determine what loan you can qualify for, what your interest rate will be and what your down payment can be. Make sure you do not make any new purchases such as a car or furniture while your loan is in process. Make sure all your payments are on time. Lenders are verifying right before closing that the credit report has not changed and if it has, it may affect your loan approval. If you have late payments, especially in the last 12 months, you will need to write a letter of explanation. If you have credit inquiries, you will need to write a letter of explanation and if there is new debt, we will need to update the credit report.
Cash is also very important. Most programs require a down payment and closing costs. We have to verify the cash that is being used in the mortgage transaction. You will have to provide a bank statement (or 2) to show that you have enough cash for the transaction. You may also need reserves (money that you will have left over after closing). Look over your bank statements, if there is a large deposit an underwriter will want an explanation and proof of where that money came from. If you are getting a gift, you may need a copy of the donor's bank statement showing they have the money to give you.
The property you are buying has to appraise for the sales price. Sometimes there are problems with the appraisals as underwriters want to know what homes are selling for in your neighborhood within the last 3 to 6 months. Usually most of the homes used for comparisons are within 1 mile of your property and recent sales – plus comparable in size and type of home. The home also has to be in good condition. FHA and VA appraisers may require repairs to be made to the home.
With mortgage volume where it is now due to the low interest rates, the more information you can give your loan officer, the easier the process will be for you. It is better to be upfront with any issues and make sure you tell your loan officer if anything changes. The mortgage company will verify your income, but they will verify it a second time within a day or two of closing. They will also update the credit information right before closing. These things could affect a mortgage that had an underwriting final approval.
It sounds so good.*
Great way to make sure that prospective clients who want to avail mortgages have a secure way to get it approve for use.