In Part 1 of the post, “Mortgage Anatomy 101″ … the Current Mortgage Process“ … I detailed much of what happens in the initial portion of your mortgage process.
In Part 2, I will continue to dig deeper into the mortgage process and touch upon your mortgage file’s submission into Underwriting, the Underwriting itself, and then Loan Approval.
At this portion of the mortgage process, your Loan Officer and Loan Processor have reviewed your file and agreed that it is ready for submission into Underwriting. All of the documentation requested of the Borrower is in and the Appraisal Report has also been received by the Loan Processor. (Remember: Loan Officers and Appraisers must maintain a “separation” during the Appraisal process.)
Your Loan Officer and Loan Processor have reviewed the completed Appraisal for accuracy, reported value, repairs needed (if any), or any unusual scenarios regarding Zoning, Flood Zones, inspections, or etc.
Realistically, the time frame from Mortgage Application to Submission to Underwriting is a 2 to 3 week process, in most cases … unless circumstances unforeseen arise. Next comes Underwriting …
Ideally, the Loan File arrives in Underwriting 2 weeks ahead of the Closing Date. One week at the latest. Why?? It takes an inordinate amount of time to Underwrite a mortgage today. Let me try to explain …
Underwriters are the last stop gap in the mortgage process. Because of this fact, they feel a huge responsibility topainstakingly review the details of each file they receive. Underwriters are held accountable for the lending of thousands and thousands of dollars. The large number of guidelines changes that have taken place within the mortgage industry in recent years/months/days, is directly reflected in the amount of time demanded to perform this important stepof the mortgage process.
The important and timely concern of Fraud Protection also falls directly on the shoulders of the Underwriter, as does theadherence to rigid requirements set by the Entity/End Lenderregarding the sale of the loan in the secondary market. Add up all the responsibilities and concerns listed above and you begin to understand why an Underwriter goes through your mortgage file with a fine-tooth comb.
The amount of time it takes to complete all the required tasks regarding your file in Underwriting is greatly effected by the current volume of mortgages in the pipeline at that time. The typical Underwriting process is about a week, but can be less or more depending on volume.
There are 3 possible outcomes when the Underwriting review is complete:
1. The Mortgage is Denied. – (and this speaks for itself)
2. The file is Suspended. – Incomplete information or inaccurate data was submitted to the Underwriter and they are unable to render a decision. The Loan Officer and Loan Processor must regroup, track down the needed info/data and re-position to resubmit the Loan for a second review.
3. The Mortgage is Approved. – Approval comes in differing statuses, as well. They are:
A. Approved with Conditions
B. Fully Approved – Clear to Close
C. Submit remaining needed items at Closing
Let me try to explain the above more thoroughly …
* Approved with Conditions – This is most commonly received, as the current Underwriting Process itself virtually makes it impossible to obtain a Clear to Close in one submission. Why?
Consider these actions that must be taken in very detailed timeframes:
* A “soft pull” credit report (a no-inquiry report that doesnot impact credit scores) must be completed inside of 10 days to Closing verifying no new debt or inquiries.
* A Verbal Verification of Employment must be completed within 48 hours of Closing to ensure the Borrower(s) are still employed.
* Additional “fraud-preventative” measures must be completed AFTER an Underwriter’s review.
Other common conditions to Approval include (but are not limited to):
* Appraisal Review – Underwriter needs betterComparables or explanations of “less than ideal” data was provided by the Appraiser.
* Large Deposits or Earnest Money – Verifications or Explanations must be provided to Undewriting.
* The “refreshed” Credit Report reveals new debt orinquiries into new credit by the Borrowers. These conditions require Verification of the new debt … the new info is permanently added to the Credit Report. Underwriting re-calculates new debt and subsequent debt-to-income (DTI) ratios and evaluates whether the Borrower(s) are still acceptable and Approvable.
* Miscellaneous items may be raised – Any items will need to be addressed, verified, and explained also.
Congratulations! Your file has now reached the Holy Grail of Mortgage Processing … the Clear to Close!
It’s now that the Commitment Letter is issued by yourMortgage Lender. This typically acts as the trigger for the Seller’s Attorney to schedule the Mortgage Closing.
Note: As a rule … most Mortgage Lenders require 2 Business Days from the Clear to Close to the Closing Date.