What Can You Do As The Borrower
Even though its the underwriter who decides whether or not to approve your loan, you can still have a positive impact on the process by doing your very best as a borrower. Here are some tips for working with your loan officer and underwriter:
- Make sure all your forms are complete and valid! Turning in half-completed or ineligible documents will only delay the underwriting process and create headaches for everyone involved.
- Be honest! Dont try to trick the underwriter. Remember, their job is to make sure you dont take on a loan you wont be able to handle.
- Submit documents in a timely manner. The sooner the underwriter can get to work on your file, the sooner you could be approved and potentially close on your home. Additionally, and perhaps more importantly, the sooner you turn in your documents, the sooner any errors can be found and dealt with. Some mistakes can push the process back weeks, so you want to get them addressed as early on as you can.
What Are The Va Loan Home Occupancy Requirements
In addition to making sure youre eligible for a VA loan, you must meet occupancy requirements. You must live in the home youre financing as a primary home the money cannot be used for an investment property or vacation home.
Its also possible to refinance a VA loan, and the VA offers a program designed to help you refinance to a lower-rate loan.
It Really Comes Down To This
Do you pay your bills on time ? Do you earn enough money to pay the mortgage ? Do you have enough money to pay the down payment and the closing costs ? Is the house worth what you are paying for it ?
If your lender knows what they are doing, once you have a pre-approval, you can relax. Thats usually done before a real estate agent will even agree to show you houses. The underwriter just checks to make sure the loan officer who took your loan application knew what they were doing.
If you want more details about underwriting, such as how much do I have to earn, what credit score do I need, how much money do I need in the bank, and a whole lot more, attend our free underwriting class at Colorado Free University. The next one is being held on Wednesday, June 13, from 6:30 8:30 PM. The class is free, but you must register with Colorado Free University at 303-399-0093. The name of the class is Get Your Home Loan Approved: FAQs and Secrets of Mortgage Underwriting.
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What To Expect From The Underwriting Process
If youre applying for a home purchase or refinance loan, youve probably heard the term underwriting.
Mortgage underwriting is the process through which your lender verifies your eligibility for a home loan. The underwriter also ensures your property meets the loans standards.
Underwriters are the final decisionmakers as to whether or not your loan is approved. They follow a fairly strict protocol with little wiggle room. But delays can still happen at different stages in the process.
Heres what to expect during mortgage underwriting, and what to do if your loan approval is taking longer than expected.
The Effect Of Turn Time
All mortgage lenders have a turn time. This is the time from submission for underwriter review to the final lender’s decision. The turn time can be affected by a number of factors big and small. Internal policy on how many loan operations the staff carries at one time is often the biggest factor. But, things as simple as the weather can throw off lender turn times quickly. For instance, if you live in a place where major blizzards are common in the winterthink Rochester, New Yorkyou should know that a big storm may delay the process.
Ask your loan officer what they expect your turn time will be and consider that factor in your choice of a lender. Keep in mind that purchase turn times should always be less than refinance turn times. Homebuyers have hard deadlines they must meet so they get first priority in the underwriting queue.
Normally, your purchase application should be underwritten within 72 hours of underwriting submission and within one week after you provide your fully completed documentation to your loan officer. This can take as long as a month, though, depending.
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Final Approval Vs Conditional Approval
Most borrowers get a conditional approval before the final approval, so dont be surprised if your mortgage underwriter has some questions about your financial situation.
Mortgage underwriters are people employed by the lender to review and analyze your ability to repay the loan.
The underwriting process will check your bank statements, credit history, and pay stubs for verification of employment. Self-employed borrowers may need to submit transcripts from their tax returns.
If anything looks amiss in these documents or raises questions for the lender, you may receive a conditional approval with a few extra steps before closing.
As part of your conditional approval, the underwriter will issue a list of requirements. These requirements are called conditions or prior-to-document conditions.
From conditional approval to clear to close
To meet these conditions, you may need to submit additional documentation, such as:
Theres no need to take these requests for additional information personally. Conditional approvals are a common part of the mortgage process.
Your loan officer will submit all your conditions back to the underwriter, who should then issue a clear to close, which means youre ready to sign loan documents. This last verification is your final approval.
How long does it take to get final approval?
Getting your loan from conditional approval to final approval could take about two weeks, but theres no guarantee about this timeframe.
Loan Application And Preapproval: A Few Days
When you first apply for a mortgage, youll typically provide a whole bunch of information about your current financial situation. You may be asked to provide documentation showing your income, your savings, your debts and any other information that may pertain to your finances. Youll also give the lender permission to look at your credit history and score.
The lender will look at all this information and determine whether, based on the information you provided, you meet their qualifications for getting a loan. This will typically take less than a week to complete.
At this point, you may get a preapproval letter from the lender stating how much theyre willing to lend you based on your financial profile. This will help you understand your price range when youre shopping for a home.
Once youve found the home you want, youll make an offer and negotiate it with the seller. If it all works out, youll both sign the purchase agreement and youll be under contract to buy that home.
Next, youll work with your lender to get full approval and be cleared for closing.
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Cooperate With Your Underwriter
With your dream home at stake, the underwriting process can seem very intimidating. However, being prepared and filling out your application and supporting documents carefully and accurately will save you precious timeâand make your underwriter happy. A PennyMac Loan Officer will be happy to answer any additional question you may have about the underwriting process.
How Long Does Underwriting Take
Your mortgage can be just as unique as your financial situation, so the exact amount of time underwriting takes will vary on a case-by-case basis.
The sooner all of the necessary documentation is in the hands of the underwriter, the smoother the process will be, so it’s important to get all requested documentation to the lender in a timely manner.
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So Then What Is Upfront Underwriting
Ideally, you would get pre-qualified before you find your dream house. That way, when you go house hunting, you already know how much home you can afford. So, itll go like this: first you get pre-qualified, find the perfect house, make an offer, and then go back to your lender with the exact price.But what if you go back to your lender having found your dream home and dont get approved for as much as you were qualified for? Every once in a while, this happens after the lender looks more closely at your credit, assets, debt-to-income ratio, etc. This may also happen if the property youre interested in has condo or HOA fees, which skew your debt-to-income ratio. Thats where upfront underwriting comes into play.
Upfront underwriting streamlines the home loan process for borrowers. It allows you to know exactly how much you qualify upfront, so there are no surprises when you find the home of your dreams.
What Do Mortgage Lenders Look For On Your Tax Returns
When youre ready to apply for a mortgage loan, you can expect to submit a bunch of documentation. This is one of the biggest loans youll ever receive, and naturally, mortgage underwriters need to ensure your ability to repay it. This financial documentation will also include tax returns of 1 to 2 years. Youre probably wondering why underwriters would need to see your tax returns, and we have all the reasons explained along with advice on making sure your tax returns are good enough to qualify you for your mortgage loan.
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What Risks Does The Underwriter Measure
The underwriter’s main job is to assess your risk. In other words, how likely are you to be able to make your mortgage payments now and in the future? Of course, no one has the ability to predict the future, but underwriters can take a good guess on how well you can afford the loan based on the information you provide.
Underwriters assess your risk on what’s called the “3 C’s”:
- : Your credit is one of the main factors in your loan eligibility. Not only do underwriters look at your credit score, they also look at your . They want to see if you paid your bills on time, if you overextended yourself financially, and the frequency with which you opened new credit . They use this information to determine your ability to take on a new debt as large as a mortgage.
Condo Requirements for a Mortgage
You Have A History Of Missed Mortgage Payments
If youve previously been a homeowner, your underwriter will want to see evidence that you paid your mortgage consistently and on time, otherwise they may not feel its worth the risk to approve your loan for this new home.
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Final Steps In The Mortgage Process
Once your mortgage underwriter has signed off on the loan, there are just a few more hurdles to clear:
Some lenders will fund your home loan almost immediately , while others may take a day or two to review the signed package first.
Find out in advance how your lender does things to avoid unwelcome surprises.
How Do Va Loans Work
Basically, you fill out paperwork from the VA that verifies your eligibility for the program. You also receive whats known as your entitlement, which is the dollar amount guaranteed on each VA loan. Lenders might be willing to loan up to four times the amount of your entitlement.
With all of that in place, its possible to get a VA loan with no money down. VA loans also dont require private mortgage insurance , but you will pay a VA funding fee when you close, which will be a percentage of the loans total value. That fee helps keep the program running for future borrowers.
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What Are Va Entitlements And Why Are They So Important
A key feature of VA loans is the entitlement. A VA loan entitlement is basically the amount of the loan that the VA will guarantee to the lender if you default.
There are two types of entitlement:
- Basic entitlement: up to $36,000 for loans worth less than $144,000, or 25 percent for loans of that amount or more.
- Bonus entitlement: Up 25 percent of the Federal Housing Finance Agency loan limit, minus the basic entitlement.
For those who need to purchase a home that costs more than $144,000, the bonus entitlement can be used. For example, in most counties in the U.S., the FHFA conforming loan limit in 2021 is $548,250. In that case, 25 percent of the loan amount would be $137,062.50. However, for the total entitlement, you need to subtract out the basic entitlement, leaving you with $101,062.50 in bonus entitlement money.
Many lenders are willing to loan those who qualify for a VA loan up to four times the amount of their entitlement, so you might be able to get a loan for $144,000 on the basic entitlement of $36,000.
For those who live in high-cost areas, the bonus entitlement is figured in the same way, but based on the higher FHFA conforming loan limit, which is based on the county where the house is located. Before applying, check the FHFA website for more information on the loan limits in your area.
How To Speed Up The Underwriting Process
In the mortgage world, underwriters are the gatekeepers between you and your home loan.
Because they are an essential aspect of the mortgage approval process, youll want to be prepared to supply all of the necessary documentation thats requested.
Being responsive and providing documentation in a timely manner will help limit underwriting delays.
Issues as simple as a missed signature can stretch out underwriting and cause closing delays. So be thorough when signing and reviewing your paperwork.
And keep your communication lines open. If underwriting is taking longer than expected, reach out to your loan officer to see whats causing the delay and whether anything is needed from you to move the process along.
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What Decisions Does The Underwriter Make
After an underwriter evaluates the documents provided, he/she will provide one of the following decisions:
- Approved: This really means “approved with conditions.” It’s rare that a borrower gets a final approval without submitting further documentation. The conditions in the approval generally have to do with the home itself, such as the appraisal or title work. They may also contain conditions that pertain to your financial worth too. For example, the underwriter may need to perform a verbal Verification of Employment to confirm your dates of employment and income. He/she may also want clarification on an item on a pay stub or your asset statement. The “approved with conditions” status is as close as it gets to a final approval, though.
How Long Does Underwriting Take on a Conventional Loan?
Compare Top Va Purchase Lenders
Take the guesswork out of finding a VA Loan provider. Veterans United Home Loans created this site to educate and empower military homebuyers. Regardless of what lender you pick, it’s always a good idea to compare and know your options.
- NMLS # Loading Reviews
- ranks No. 1 in Customer Ratings for VA purchase lenders, according to ratings and reviews collected by TrustPilot.
- In , closed 0 VA Purchase Loans, which was 9% of all VA Purchase Loans closed nationwide last year.
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Dry Versus Wet Settlements
When everything checks out on your Closing Disclosure, youre ready for closing day.
There is one final task, and its what the entire home buying process has been leading up to: The lender must fund the transaction by providing the cash to pay for your new home.
You might have a wet settlement, where the lenders money is disbursed at closing. This is also called table funding.
Some lenders prefer a dry settlement, which means the money is paid a few days after closing.
Ask the closing agent or your mortgage broker how lender funding will be handled. A payment delay may make sellers cranky if not worse.
As the buyer, you will almost always have to bring money to closing to cover your down payment and closing costs.
Its OK to use a cashiers check, certified check, or to wire the money. You cannot bring cash to most title offices.
Be sure to check with the closing agent if you wire money. Confirm that the wiring instructions are correct, especially the recipient account number.