When consumers first complete and then submit a loan application, the initial thought might be that the work has been done and now we’re just waiting on loan papers. The fact however is that loan submission is one of the early steps in the approval process. And indeed it is a process. Perhaps we had an initial conversation over the phone and the result was completing a loan application. At the same time, you were asked to provide some additional paperwork and documentation. This additional paperwork includes things like paycheck stubs and bank statements, among other items. I’ll provide you with a customized list of things needed at application time.
At this stage, it can get pretty quiet on the borrower’s end and the mistaken impression might be that the loan file is just sitting on someone’s desk. After all, the lender hasn’t contacted you in over a week, right? Yet that’s hardly the case. Once a loan is submitted and documented, the wheels really begin to turn. It’s just that the consumer isn’t privy to what all is being done. An appraisal is ordered, title insurance, escrow opened along with various third party documents needed in order to submit the loan for a full approval.
Mortgage loan applications are mostly submitted through and online Automated Underwriting System, or an AUS. The digitized application is submitted through the AUS and shortly thereafter, a list of items needed to close the loan are shown. These items are referred to as Loan Conditions. The loan can be approved based upon these conditions being met. The list is typically benign and mostly just getting all the credit documents in the file. The “findings” from the AUS might ask for an appraisal and if so, what type of appraisal is needed. Paycheck stubs. Tax returns. These items are typically already in the loan file prior to submitting the loan to the AUS.
When the loan package is documented it then goes over to the underwriter. The underwriter is the individual that certifies the loan package complies with the guidelines of the selected loan. The underwriter will review the findings and compare them with what is physically in the loan package. If a finding asks for paycheck stubs covering a 30 day period, the underwriter will look for those paycheck stubs to make sure they’re recent and cover 30 days. Sometimes though, there are additional questions after the loan has been documented and the findings answered. The underwriter can verify the documentation submitted covers the findings. It’s when additional questions first arise that can make an applicant a little nervous.
“Why do they need that?” or “I already submitted those, why do they need more?” or “They’re asking more questions, is my loan going to be turned down?” It can be a bit unsettling when a lender comes back later and wants more information. Yet rarely is it a situation where the loan approval is hanging in the balance. At this stage, your loan officer knows whether or not your file will be approved. This is due to the review of the documentation submitted. But in most every situation, when the underwriter has questions, it’s more than likely it’s a bit of housekeeping and it’s way past decision time.
For example, if the findings ask for the most recent paycheck stubs covering a 30 day period, it’s likely the preapproval was issued two or even three months ago while the consumers shopped for a home. When more questions are asked at the later stages of the approval process, it’s more of a signal that you’re almost home and your papers will soon be sent to the settlement table.
The key to answering lender questions is fairly simple: just answer. There doesn’t need to be something dramatic to explain a late payment on a credit card that showed up six months ago. In this instance, you might be asked to explain why the payment was late. A simple response such as, “I really can’t recall” will both satisfy the underwriter’s question and keeping the loan in compliance. If you’re not sure how to respond to any question, that’s where I can come in to help.