01 Mar Avoiding Common Underwriting Issues
While every homebuyer hopes for a smooth approval during the mortgage loan process, problems can arise — particularly during the underwriting stage. At Fairway Independent Mortgage Montana, we’re here to provide simple ways to avoid common underwriting issues. Understanding the process by which the underwriting team reviews your application can help evade an error that delays your loan’s closing.
Missing Information and Documents
For a loan application to be approved, the underwriter must review every accompanying document with a fine-toothed comb, making sure there are no inconsistencies, errors or gaps. This process includes contacting and receiving verification from outside entities such as employers, credit bureaus or banks where your claimed assets are housed.
Whether intentional or inadvertent, failure to include all information, documentation and pages of required documents is the most common reason for an application hanging in limbo as opposed to receiving a formal approval. To make sure your loan application does not experience this fate, double check to make sure that every requested signature has been filled in. Also include every page of required documents. Many folks do not realize that even a blank page is important to the underwriter. While your loan officer will prep you on this information and take a look at your application packet before sending it to the underwriting team, your best bet for a fast transaction is to include everything initially.
While exceptions are sometimes made based on loan type and lender, a two-year period of consistent work income is generally required to secure a home loan. Underwriters pay close attention to the potential ability of a borrower to repay their loan through the full term. If a borrower’s ability to do this looks doubtful, it does not necessarily mean the application will be denied, however. Through extra paperwork, often including a Letter of Explanation, the underwriter can make a positive determination. To avoid complications during this step, it is best to remain with your current employer until after the loan has closed, particularly if your future plan is to move from a salaried position to self-employment.
When preparing for a down payment, it’s important to know that the source of the funds will be an important piece of information for the underwriter. Occasionally, a loan type will also require that the funds be “seasoned,” which means they have been in your bank account 60 days or more. While this may seem like an odd requirement, it is simply an additional way for the lender to prove a borrower’s ability to repay on a long-term basis rather than using funds for a short period of time to obtain the mortgage loan. Ensuring your down payment fits both of these requirements is a great way to avoid potential setbacks.
If you have any questions about additional requirements during the mortgage process, feel free to reach out to one of our loan officers today! We’re happy to help in both the initial questioning stages and throughout each milestone of your loan.