Borrowers don’t really get the opportunity to pull back the curtains and speak directly with various departments and individuals within a mortgage operation. Certainly a borrower will speak with the loan officer and the loan processor but beyond that, most others are off-limits. Everyone within a mortgage company plays an important and needed role. Some roles are a bit more important than others, but all are required. One of these important roles that are off-limits is the underwriter.
The Role of an Underwriter
The underwriter within a mortgage company is tasked with making sure the loan submitted meets the requirements of the chosen loan. In addition, after the loan has received an initial approval, any remaining questions and documents will need to be addressed. The underwriter won’t communicate directly with the applicant but instead work with the loan officer or processor to relay the request to the consumer.
Borrowers are asked to provide no shortage of documentation when submitting an initial loan application. Paycheck stubs and tax returns and bank statements are just a few of the documents needed. There are more. Further, once the application is submitted a brand new round of requests is issued. Loan disclosures need to be signed or initialed and returned to the lender. Once these requested documents are submitted and the file is deemed ready for the underwriter, things can go a little silent on the borrower’s end. Borrowers can then interpret that all that is waiting for the loan to be reviewed and signed off. After all, everything the lender asked for upfront was submitted, right? But very few loan applications make it though the loan approval process without needing something else along the way.
This “something else” can sometimes be a little unsettling in the borrower’s mind. Asking for more information or clarification could indicate there’s a problem with the application, right? Why do they need more stuff? Why the holdup?
Main Lender Requests
There are typically two types of lender requests made after an application is submitted. The simplest of requests is to provide updated documents. New and fresher versions of ones previously submitted. Lending guidelines require certain credit documents be no more than 30 days old. Most loan applications, typically those submitted for a preapproval, don’t have a property picked out. At the same time, when shopping for a home, sellers want to see that not only have the potential buyers applied for a home loan but have also received a preapproval. A preapproval to the point that all that is needed is a property address.
However, buyers most likely won’t find a home and settle on a price and execute a contract during that 30 day period. When applying for a mortgage and the lender asks for paycheck stub and bank statements, they’re the most recent ones. But after 30 days they no longer comply with lending guidelines. The lender may still approve the mortgage but will also ask for updated documents. Yet there are other items that might need more than a new date.
Common Loan Conditions
These additional items are referred to by lenders as “loan conditions” which essentially means the loan will be approved “on condition” these questions are satisfied. But borrowers shouldn’t necessarily be concerned. If the loan could not be approved at all it would have never gotten to this stage. But there are items that need to be clarified before loan papers can be drawn.
So how do you answer underwriter questions? The answer is easy- simply answer them. That doesn’t mean to be trite but it’s the truth. For example, the underwriter reviews a bank statement and compares paycheck stubs with deposits shown on the statement. If someone gets paid on the 1st and 15th, bank statements should reflect those amounts on those dates. But if there’s a deposit shown on the statement on the 10th which does not match up with someone’s payday and the funds are needed to help finance the home, the underwriter will want to know where those funds came from and to make sure the newly discovered funds aren’t some sort of personal loan.
For example, your loan officer asks about the deposit on the 10th. The answer might be, “These funds are given to me by my parents.” This indicates the funds are a financial gift. No worries there, it’s just that additional documentation is needed. The lender will ask for some further documentation of the source of funds and even for a letter stating the funds are a gift, who gave them, and the funds aren’t expected to be paid back.
Answering underwriter questions can be a bit unnerving but don’t have to be. When those questions come up, I’ll be able to help answer them for you. You won’t be alone during this process and I’ve seen most any question any underwriter can ask. I know what the underwriter wants to see. Working together, we’ll get these questions answered in a timely manner and move your loan forward.