In recent years, loans are mostly underwritten with automated systems. Underwriters main function nowadays is to confirm that the information entered are accurate, to clear approval conditions, and to ensure the deliverability on the secondary market.
After you have applied for your home loan with a loan officer your loan officer will prepare a package to provide that underwriter your loan application. A good loan officer will put the package of your application together in a very clean, clear way that the underwriter knows exactly what you are looking to do with your refinance or home purchase. Therefore, the next step after you deal with a loan officer is for your file to be sent to an underwriter and be underwritten. An underwriter is a key part of the loan process. The underwriter can make or break a loan and generally has the authority to deny a loan that he/she does not feel comfortable signing off on. The underwriter will look at every loan application and document submitted and make sure addresses match up, income seems reasonable and is well verified, appraisal report is acceptable, social security numbers and dates of birth match up, names and addresses are filled in completely and accurately, loan application is filled out 100% completely and accurately. The underwriter may condition the loan officer for items that he/she feels are deficient or not acceptable to the lenders standards.
The underwriting process is when you will be asked to gather additional information for your mortgage professional. Often times they will submit a loan, and the underwriter will ask for more documentation on certain items. Do not be alarmed, this is a very common process.
The underwriter has the ability to approve or deny your loan application. They act as quality control agents for the lender and there main job is to spot potential problems in a loan file that may cause the company to lose money.
Topics that will reviewed by an underwriter are commonly : borrowers credit file, rent history, bank account and asset information, appraisal and title of the home.
Often your mortgage advisor can explain a situation that is not evident to the underwriter in such a way that the problems are removed without you doing anything.
Loan Approval - Loan Approval means that the borrower meets the lenders qualification requirements and also its underwriting requirements. In some cases, especially where approval is provided quickly as with automated underwriting systems, the approval may be conditional on further verification of information provided by the borrower.
Almost 99% of all loan approvals are conditional. This means you have to meet certain conditions to get your loan. When you first receive your approval, your broker will know exactly what the lender wants for your loan to be funded.
The loan approval will outline what documents that are required to close on this loan. The loan approval will detail the parameters of the approval in regards to loan amount, loan to value, interest rate, and monthly payment.
Even after you receive loan approval, the lender will verify your employment again, and may check your credit again. Do not take loan approval as permission to quit or change jobs, to buy a car, to rent furniture, or to allow a mortgage or credit card payment to be more than 30 days late.
Final loan approval means that your mortgage loan has been approved, all conditions of the approval have been met and you are ready to close your home loan refinance or purchase transaction. Some basic conditions that are usually required on all loans to be met before a final approval will be issued are: documenting and verifying employment and income, obtaining and having an appraisal of the collateral property reviewed and deemed acceptable and verifying homeowners insurance is obtained and paid for.
Once a conditional loan approval is recieved the Loan Officer, Loan Processor and borrower need to work together to get the conditions satisfied just as soon as possible. Most conditional loan approvals will have an expiration date and often times there is a rate loack on the loan which can also expire so time is of the essence. For example, a common approval condition is for a property appraisal. Borrowers must understand that they should not delay in arranging with the appraiser for the inspection of the property - this is something that often causes delays in getting final approvals.
If all the conditions cannot be met then the loan will not get a clear to close. Your mortgage broker may have to take it to another lender with looser guidelines.
Loan Approval also means that you are only a few days from your final closing. The only steps remaining are arranging for the final documents to be delivered to the title company or closing attorney and having the lender wire the funds. You loan officer should also review the final facts and figures with you to confirm everything and ensure a smooth closing process.