Check & Re-check – Good Advice for Mortgage Borrowers
Editor’s Note:
This good advice came from Jamie Wolf, a Senior Loan Officer with Houston Capital Mortgage, and he’s given us permission to share it with our readers, particularly those applying for mortage loans:
Loan quality has been a major focus, especially since 2008, so federal mortgage regulators have instituted loan quality initiatives. As a result, changes are evident in every aspect of today’s mortgage process. It impacts the client’s loan process from application until after closing. Let’s look at what this means to you, the mortgage consumer.
Once you apply for a mortgage, don’t go shopping! Don’t buy furniture, appliances, or incur any new debt. Even if it’s a zero interest item or does not require payments for a certain timeframe. Regardless of the credit offer it still requires repayment and counts as a qualifying debt.
Today’s loan process starts with a loan application and initial credit report. Those two important items are the foundation of the loan process. We verify data and underwriting decisions are made based on that data. Today’s loan process rechecks debts before closing. Additionally, other sources are checked for undisclosed debts. If that check comes back differently, the loan must be underwritten again. A significant change could result in the loss of approval.
The same thing goes for other aspects of the mortgage process. A loan application has income figures provided by the client. The client provides supporting material for those application figures. Today’s process contains two years of income review. Employed persons provide 30 days of paystubs, W2 forms & tax returns for two years. Self-employed persons supply the same plus their business information as well. Those documents are their business tax returns, K1’s, or even profit & loss statements depending on time of year. Today’s loan process rechecks income with the employer before closing and checks tax data electronically with the IRS. If that check comes back differently, the loan goes back to underwriting. Again, significant change to income could result in loss of approval.
A loan application has asset figures provided by the client. The client provides supporting material for those application figures as well. Lenders require recent statements for checking, savings, money market, stock, bonds, IRA, 401k, etc. The actual asset, source of funds, and often reserves are all verified. Gifts or loans have additional requirements attached. Lenders must show that “unallowable sources” of funds are not being used.
The appraisal is performed to obtain an independent property value. Today’s appraisal process is designed to prohibit lender influence. The lender is not involved in the appraisal process, until receiving a completed appraisal. Consequently, if help if needed by the appraiser, realtors must be pro-active and involved to supply material. The property appraisal gets underwritten with the loan file. The underwriter may ask questions, want information, or require additional collateral products.
But what about after closing, are we finally done yet? Technically, yes they closed, but the reality is no not really. Lenders do required post-closing loan audits. Clients sign forms at closing agreeing to cooperate with such requests after closing.
See a common theme here? Today’s whole mortgage system is built on the theory of check and re-check.
[...] Source: http://blog.heritagetexas.com/2012/01/23/check-re-check-good-advice-for-mortgage-borrowers/ [...]