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What happens after underwriting? Achieving final approval from the mortgage underwriter is a big deal — but it’s not quite time to celebrate. You’ll go through a few more steps before you get the keys to your new place. The lender has to double-check your income and employment. And you still have to sign final documents and pay closing costs. Learn exactly what needs to happen after final approval to put your home sale over the finish line. Start the mortgage loan process today (Oct 21st, 2021) In this article (Skip to…) Final mortgage stepsConditional approvalFinal approvalDocument reviewAfter the Closing DisclosureDry vs. wet settlementsLoan funding 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: Your lender will conduct a final review, double-checking to make sure your documents are correctThe lender will probably do a quality control check, pulling your credit report and verifying your employment one last timeYou’ll get your closing documents at least three business days before closing to review before signingYou’ll bring in your cash to close and sign your final documents Some lenders will fund your home loan almost immediately (table funding), 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. Final approval vs. conditional approval Most borrowers get a ‘conditional approval’ before the ‘final approval,’ so don’t 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: Additional bank statements or pay stubs — The lender may need this additional information to get a fuller picture of your financial situationGift letters — If a close friend or family member gave you money to pay for closing costs or your down payment, you need a letter from the donor confirming the giftVerification of insurance — If you’re using a conventional loan with less than 20% down, your lender will require private mortgage insurance. (USDA and FHA loans come with built-in mortgage insurance; VA loans don’t require it) Explanations — Your lender may want you to explain late payments or large transactions that appear in your bank statements. If they’re anomalous, they shouldn’t affect your eligibility There’s 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 you’re 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 there’s no guarantee about this timeframe. You can help speed up the process by responding to your underwriter’s questions right away. Submit the additional documents the same day of the request, if possible. By providing documents and answering questions, you’re doing your part to keep your loan on track. Final approval is not quite the end of the mortgage process, though. You still need to sign documents and go through a post-signing mortgage approval process. Read on. What happens after final approval? After you receive final mortgage approval, you’ll attend the loan closing (signing). You’ll need to bring a cashier’s or certified check for your cash-to-close or arrange in advance for a wire transfer. As your closing day approaches, you must avoid changing anything in your mortgage application that could cause the lender to revoke your final approval. For instance, buying a car might push you over the debt-to-income ratio (DTI) limit. Or, opening a new credit card account or applying for a personal loan could affect your credit score. Do not open credit accounts or finance big purchases prior to closing. This could affect your loan approval. If this happens, your home loan application could be denied, even after signing documents. In this way, a final loan approval isn’t exactly final. It could still be revoked. This really happens to homebuyers. So protect yourself. Once you apply for a mortgage, enter a “quiet” period. Buy only the basics until your loan is “funded.” Add nothing to your credit balances, and do not sign up for any new accounts. This is good advice whether you’re a first-time homebuyer, a refinancing homeowner, or an investor buying a rental property. Document review: LE vs CD You may remember that when you applied for a mortgage, the lender provided a Loan Estimate (LE) form which outlined your mortgage terms and provided an estimate of your costs. Now, at least three business days before your closing day, you will receive a Closing Disclosure (CD) form. What’s the difference between these two documents? Loan Estimate form: This document shows an estimate of your loan terms and loan costs which can vary based on type of loan, mortgage rate, and loan amountClosing Disclosure form: This document shows what you’re actually scheduled to pay, both on your closing day and for your monthly payments There shouldn’t be a huge difference between your LE and CD, but it’s up to you to compare the documents to make sure. What happens after Closing Disclosure? Federal law requires that mortgage lenders provide a Closing Disclosure at least three business days before your closing date. When you get your CD form, you need to compare it against the Loan Estimate you received when you made your mortgage application. Some charges on your Loan Estimate, such as the loan origination fee and appraisal fee, should never change on your Closing Disclosure. If these fees have changed, contact your loan officer and ask for a cost correction. Even a 0.25% increase in your loan origination fee can have a huge impact on closing costs, since this fee is based on your loan amount. Costs that can change from LE to CD Lender fees shouldn’t increase between your LE and CD, but other costs listed on your CD can increase. Some can increase by up to 10% while others can increase by any amount. Can increase by up to 10%: These include survey fees, title search fees, and pest control fees. Since these services are provided by third parties, the costs aren’t controlled directly by the lenderCan increase by any amount: Some costs depend on the final details of your loan, so they could increase significantly between your LE and CD. Your homeowners insurance provider, for example, may require an upfront payment. Or you may need to pay property taxes in advance. Delays in your closing day could increase some costs, too Be sure to ask your loan officer or closing attorney about any cost increases you see on your CD. What about the interest rate? The interest rate on your pre-approval or Loan Estimate should resemble the rate on your Closing Disclosure, especially if you locked in your rate early in the loan process. In fact, it’s illegal for lenders to underestimate rates and fees on a Loan Estimate only to surprise you with higher costs on the Closing Disclosure, according to the Consumer Financial Protection Bureau. Even so, your interest rate could still go up if: Your financial situation changes: A credit score drop or a loss in income could prompt the lender to increase your rate or rescind your eligibilityYour rate lock expires: Delays in closing could mean you have to lock in a new rate, although rate lock extensions can often prevent thisYou change loan programs: If you decided to get a conventional loan instead of an FHA loan, for example, you’d likely see different ratesThe home’s appraisal came in low: A low appraisal changes your loan-to-value ratio (LTV), which could affect mortgage rates or eligibilityYour lender couldn’t verify everything: If underwriters can’t verify your side-hustle income or your overtime, your debt-to-income ratio could go up. This could cause an increase in your rateYou changed details of the loan: If you’ve decided on a 30-year term instead of a 15-year term — or if you’ve decided to put less money down – your rate would go up Before you lock in a mortgage rate, get a realistic estimate from your lender about how long it will take to close the loan. Choosing a sufficient rate lock period is one of the best ways to protect yourself from surprise rate increases on your new loan. Dry versus wet settlements When everything checks out on your Closing Disclosure, you’re ready for closing day. There is one final task, and it’s 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 lender’s 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. It’s OK to use a cashier’s 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. Loan funding: The “final” final approval Your mortgage process is fully complete only when the lender funds the loan. This means the lender has reviewed your signed documents, re-pulled your credit, and made sure nothing changed since the underwriter’s last review of your loan file. When the loan funds, you can get the keys and enjoy your new home. Verify your new rate (Oct 21st, 2021) Original post here: What happens after underwriting? Mortgage approval and closing What happens after underwriting? Mortgage approval and closing syndicated from https://reversemortgagesolutions.net/ Read original post here: https://donaldsingeer.blogspot.com/2021/10/what-happens-after-underwriting.html
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Your mortgage application: underwriting and loan approval Once you submit a mortgage application, it goes into underwriting. But what does underwriting mean? Mortgage underwriters examine your application and documents to approve or decline your applicationComputers can approve mortgages, but human underwriters must verify that your documents match the information on your applicationUnderwriters usually require proof of your income and assets and may have additional requests Your approval is usually subject to conditions. These conditions can range from bank statements to tax returns to explanations about your credit. All conditions must be in and approved before you can close. Verify your new rate (Oct 21st, 2021) It starts with an application You begin the application process by working with a loan officer or loan processor. He or she takes your information and completes a mortgage loan application. Your loan officer reviews the Loan Estimate (LE) form and other disclosures with you, answers your questions about the forms, and tells you what you need to provide to secure your mortgage approval. Underwriters check a borrower’s “three Cs.” That’s character, collateral and capacity. In other words, your credit rating, income and the property value. Underwriters are not always human In most cases, your loan officer or processor submits your application electronically to an automated underwriting system (AUS). The program generates a recommendation and a list of conditions, which you must meet in order to finalize your approval. (Fannie Mae’s Desktop Underwriting system’s results include “approve,” “refer,” or “refer with caution.”) If you get a “refer” response, a human underwriter must take a second look and perhaps underwrite your loan manually. “Refer with caution” usually means that the system declined your application. If you get an “approve” response, the system kicks out a list of conditions you must meet to finalize your approval. Your loan officer will help you get these things, and a human underwriter will make sure that the documents you provide match the information on your loan application. Mortgage underwriter checklist A primary role of the underwriter is to approve loans that will perform and limit risk. That means carefully examining a borrower’s entire loan profile. Typical tasks include Examining credit history. Your credit history is one of the most important factors in the loan approval process. Underwriters analyze your credit history because of the way you managed debt in the past is a good predictor of how you will handle your mortgage obligation. Late payments or collections will require additional documentation. Verifying employment and income. Underwriters verify your employment history to make sure your income is stable. They may call your employer to make sure you work there and will review your last two years’ W-2s or tax returns. Underwriting systems also compare your income and debts, calculating what’s called a debt-to-income ratio, or DTI. Check home appraisal. A licensed home appraiser compares the property to nearby, similar homes, and establishes its market value. Underwriters examine the appraisal to make sure the appraiser followed the lender’s guidelines and made accurate adjustments to arrive at the value given to your home. Verify asset information. Your down payment is a very important factor and underwriters scrutinize it carefully. Did it come from your own funds? Or does your last checking account statement contain some weirdly huge deposit? They’ll quiz you and ask for more documents, in that case, to make sure that the down payment was not borrowed or furnished by someone who benefits from the sale, like the seller or real estate agent. Automated underwriting Most banks and mortgage lenders use Automated Underwriting Systems (AUS). They are sophisticated software systems that render preliminary underwriting decisions. The system lets the human underwriter know if a mortgage applicant meets the lender’s guidelines, based on information from the loan application and credit reports. Fannie Mae’s version of automated underwriting is DU (Desktop Underwriter), and Freddie Mac’s is LP (Loan Prospector). Once a loan officer or processor submits an application, the AUS reports its findings and generates conditions. Usually, conditions simply involve proving that what was input on the application is true — bank statements and pay stubs, for instance, to verify the income and assets stated on the application. Most mortgage lenders do some manual underwriting of mortgage applications. Usually, that’s because the applicant has an insufficient credit history or the credit report has been compromised by identity theft. Unusual mortgages or very large loans are also frequently underwritten manually. Most lenders that fund mainstream programs use a combination of automated and manual underwriting to complete a mortgage decision. “Approved with conditions” There are a number of stages in getting a mortgage loan. Your first step is mortgage pre-qualification. And then you’ll complete an application and submit it for mortgage pre-approval. After your loan comes out of underwriting, the goal is to have your loan approved with conditions. Don’t be fearful when your lender tells you your approval has conditions. A conditional loan approval is fairly standard. Satisfying the loan conditions, whatever they may be, is how you turn your conditional loan approval into a full/final approval. Underwriting conditions can vary according to the type of loan for which you’ve applied, your employment, income and overall credit profile. The way you or your lender complete the mortgage application can influence your approval and the conditions you must meet. Final approval Examples of underwriting conditions could include anything from documentation of proper homeowners insurance to letters of explanation for certain items in question with your loan file. And some conditions can trigger a request for additional ones. For instance, your pay stub contains a deduction for child support that you didn’t put on your application. Now you’ll need to provide your divorce decree. The best thing you can do as a soon-to-be homeowner is to respond promptly to your loan officer’s requests. It’s also important to understand not to shoot the messenger here. Your loan officer is your liaison between you and the underwriter. If you don’t understand or can’t comply with a condition, he or she may be able to help you find a way around it and get your loan closed. Remember that the lender employees are ultimately on your side and doing their best to help you close your loan on time. Verify your new rate (Oct 21st, 2021) Original post here: What does “underwriting” mean? How to deal with loan conditions What does “underwriting” mean? How to deal with loan conditions syndicated from https://reversemortgagesolutions.net/ Read original post here: https://donaldsingeer.blogspot.com/2021/10/what-does-underwriting-mean-how-to-deal.html |