What exactly does underwriting look for?? (insurance, loan officer, 2013, income tax)

[smithn87]

We are in the process of buying a house! The Seller has accepted our offer, Inspection has been completed, Lender has received the Title and Appraisal, & now we are waiting for the Underwriting... What exactly do they do/look for? How long does it usually last??? We are expecting to close on the 27 of June! We have a USDA Loan. I am SUREER nervous.. Ha!

[GarrusUS]

Generally speaking, underwriters are make sure that you can afford the house (both now, and in the future). They also make some effort to ensure that your property is not going to be financial sinkhole for the lender (hence the appraisal and title report...and for condos, things like the condo association budget, owner-occupancy ratio, etc.).

The underwriters check the information you provide (and further information they request) and the property conform to the lending guidelines for the mortgage you are seeking (in this instance, a USDA mortgage). You can check the USDA underwriting guidelines here: http://www.rurdev.usda.gov/supportdocuments/ca-sfh-grhunderwritingguide.pdf

Underwriters want a very clear sense of where your income and funds are coming from and need to able to support the conclusion that your income/funds are sufficient to handle your current debts and future mortgage payments. A good loan officer or processor also tries to make sure all the possible documents are gathered upfront before your file gets sent to underwriting.

I assume you have already submitted a number of financial documents to your loan officer/processor (who will pass them along to underwriting) since your closing is scheduled for next week. If you haven't cleared underwriting yet (which is sounds like you haven't), be prepared to provide more documents and/or (updated) copies of documents you already submitted.

I am in the last stages of the mortgage process (hopefully) and should get my clear-to-close from underwriting on Monday. My closing for a condo is also scheduled for June 27. I had to provide these documents to my loan processor who provided them to underwriting:

* Paystubs, past 30 days
* Federal income tax returns, past three years
* Bank statements, past two months
* Transcripts (education)
* Business Profit-and-Loss Statement YTD (self-employment income)
* Business balance sheet
* Business bank statements, past two months
* Third-party verification of existence of self-employment
* Home/Condo insurance policy certificate indicating adequate coverage with annual premium prepaid in full
* Master Deed
* Condo association trust documents, budget, financial statements, master insurance, questionnaire
* Explanation of recent credit inquiries
* Explanation for variation in (projected) self-employment income
* List of borrower's addresses for past two years

Sending positive thoughts!

[Pfhtex]

Originally Posted by smithn87

We are in the process of buying a house! The Seller has accepted our offer, Inspection has been completed, Lender has received the Title and Appraisal, & now we are waiting for the Underwriting... What exactly do they do/look for? How long does it usually last??? We are expecting to close on the 27 of June! We have a USDA Loan. I am SUREER nervous.. Ha!

Here is The Checklist:

• 2 years Tax Returns, Federal/State/Business, all pages
• If you Extended 2013, send the extension, and 2011 returns
• W2s all jobs for 2012 and 2013
• One month recent paystubs, keep sending 'em through closing
• 2 months' Bank statements, all accounts, all pages, even that last blank one
• If you have more than enough accounts, we might not need the little ones, your mileage may vary
• REFINANCE: Send Declarations page from your homeowner's insurance policy, a payment statement for all mortgages on the home, and the Mortgage NOTE from the paperwork from your prior transaction on that property.
• Retirement accounts - pdfs not screen prints, all pages
• Contact info for landlords for past 2 years if you've been renting,
• Check copies for rent payments for the past year - if you've been paying rent in cash, or if the checks do not perfectly match the rental agreement, get ready.
• Employers for past 2 years, full contact info
• Drivers License and SS card, Green Card if you are a Resident Alien
• If you are a non-Resident Alien, we can still do this, but we need to talk
• Divorce Decree, all pages, if applicable
• Proof you are actually receiving child or spousal support (check copies)- also, it must be Court Ordered.
• Bankruptcy discharge if applicable
• Maybe even all the bankruptcy papers. #Fun
• Social Security /Disability Award Letter - the one you get every year saying "this is how much you get"
• Proof of continuance of Disability
• VA: DD214. A Good lender will get the COE for you. Disability letter if applicable. God Bless you and thank you.
• Self Employed? We're using Line 31 of Schedule C's, or full business returns, need the K-1, need Articles of Incorporation, need proof of when you started the business, if you shifted from S/E to a W2 job, or vice versa in the past two years, strap in.
• Bonus Income? Go ahead and dig up end of year paystubs for the past two years so we can average it. I'm sure you kept them, laminated and handy right on the refrigerator.
• Same deal with W2 income that includes overtime or is part time
• Part time = any income where the employer will NOT say that you are designated as Full Time with a guaranteed minimum of 40 hours per week.
• Again, your mileage may vary based on your Lender
• Pregnancy leave? We're gonna need the kid. Not really. Just a letter, and a copy of the leave from your employer, and proof you went back to work.
• New job? How new? Are you Contract or really full time? Can of worms.
• Buying a home with a wood stove? Check this out: If it is not Certified, or certifiable, it will have to be removed and the hole capped. Then after we close, nobody really cares if you put it right back. I didn't say that.

LOEs:

• Letters of Explanation. These can literally be one sentence at times, and they tend to 1)Document the obvious and 2) really annoy. Make sure you hand-sign and date them.
• Credit: LOE for every single Inquiry on your credit report, including the one made by the bank to whom you are making this very application
• Derogatory Credit: Collections, late payments, post-Bankruptcy derog's. Remember, you are borrowing at times several hundred thousand dollars, sight-unseen. Make it look good, make it look like you care.
• Job changes, gaps in employment, inequities between paystubs and deposits, inequities between W2s and Verifications of Employment (VOEs)
• BANK STATEMENTS - THIS IS YOUR FAVORITE: Every deposit over, say $300, on any of your bank statements, that cannot be readily connected to payroll or some form of income must be fortified with: an LOE, and then a copy of the actual check and deposit slip from that deposit.
• The real fun here is if you move your own money around, then we need THAT statement from whence the deposit came, and ....wait for it.....
• Then THAT statement will be inspected for deposits over $300, and down the wormhole we go.
• This is typically where I lose credibility and any hope for referral business.
• If you are flying solo and your spouse or anyone else's name is on your bank statements, we need a letter from them saying you have full access to all funds in the account
• If the credit report has a HAWk flag, or shows a business at that address from whenever, you need to write an LOE explaining that you have no idea what the Hell that is.
• OK, I can't believe this is my job.

Tidbits:

• USDA? How many humans will be living in the house? We need tax returns for all of them, on the loan or not. You can't make too much money. You have to make enough, but not too much.
• Same with various Grant programs
• USDA/VA are a tighter fit because the lender is walking into the thing upside down due to the rolled-in funding fees. Get ready for nit-pickiness regarding all things, especially the appraisal
• Is that a condo in Florida you want to buy? As a Second home or investment property? Nope.
• Regardless of your credit, your lender should work with you to enhance your scores and optimize your situation prior to Lock.
• A Rate Lock is when your lender Locks in your rate. This means that you are guaranteed that rate for x number of days. SOME lenders have a one-time float-down, meaning if the market improves substantially, they will reset the rate at the improved mark. Most do not.
• The longer you lock your rate for, the higher it is. Usually it's 30 days.
• Don't obsess over .125% movement. Obsess over everything above this bullet point, and whether your lender can walk and chew gum.
• Ask your Loan Officer how long they have been doing Purchase loans if you are buying. Many, many LO's have been handling refinances only for years, and Purchase is a completely different animal. If you talk with a few lenders, you will be able to sniff out the newbie.
• Ask about their "turn times" - this relates to processing and underwriting AFTER you have provided most of the above.
• Remember, the "clock" does not start until you have provided most of the above.
• If a lender asks you for $$ during your first conversation, run.
• You should only remit $ for the appraisal AFTER you have reviewed the Opening Disclosures package to the point that you understand it and are comfortable. Then the appraisal fee is anywhere from $400 to $700.
• Your lender will not know your Cash Due At Closing (purchase) for a few weeks. They should be able to ballpark it, but a lot of work has to be done by other parties, which they then collate.
• DO NOT SCHEDULE MOVERS ON THE DAY THAT YOU ARE SUPPOSED TO CLOSE. DEAR GOD, DO NOT DO THIS. This is a process. Work with your lender, then write the contract so you have a day or 2 after you sign docs to get out. Every state is different. in CA, doc signing is not "closing," Closing happens when the transaction is Recorded 1-2 days after that, FOUR DAYS if it's a weekend bracketed by Memorial Day or somesuch.

This is a partial list. Many times, issues come at you like a snake out of a can. If your Loan Officer answers the phone, provides a list like the one above to you at the outset (tailored to your circumstance), and seems to care, you may have a good one.

Keep talking. Keep asking questions. Keep breathing. You're going to get through this. One day, down the road, you'll think of this process, and likely throw furniture.

[DMenscha]

Underwriters look for anything they can kill the deal with!

[jqscooby1]

Originally Posted by DMenscha

Underwriters look for anything they can kill the deal with!

I tend to hope they don't do that because, they have to make money as well. If you kill a loan, then the lender is not making money. They make money on the loans.

[CGab]

Originally Posted by DMenscha

Underwriters look for anything they can kill the deal with!

NOT TRUE! They are just verifying that you can afford to repay the loan. They verify your income and accounts. If you were preapproved I'm sure everything will be fine, don't worry.

[Michelle2020]

Going through the homeowner process now. I was approved with a conditional letter. Now they are asking for me to explain the loss and I don't know how to explain a side business I operated without being registered. I did everything but that. I advertised and now I'm screwed. Any suggestions?

[SmartMoney]

First, as instructed elsewhere in another thread on CD, do not bring up the side business not being registered unless asked why it's not registered. But it is also hard to give you ideas without knowing more about the situation and when did the loss occur. Are the earnings being used for income? A loss for a side job can be due to 1001 reasons - they are likely trying to determine if the loss is ongoing (do they need to deduct losses from your W-2 income) or a one-time thing.

[Ninna8894]

We are currently in the underwriting process. We have literally given them everything short of blood. They have now requested last paystubs for 2016 & 2017 (they already have W-2's & tax returns). I am beginning to get very frustrated. the stress is getting the best of me. What in the world more could they ask for?

[Pfhtex]

Originally Posted by Ninna8894

We are currently in the underwriting process. We have literally given them everything short of blood. They have now requested last paystubs for 2016 & 2017 (they already have W-2's & tax returns). I am beginning to get very frustrated. the stress is getting the best of me. What in the world more could they ask for?

Looks like the goal is to average bonus, commission, overtime, or part-time income, over two years, so as to facilitate your approval. W2s and Tax returns do not break down these kinds of income components.

They could also be about to ask you for a letter from your employer confirming that the type(s) of income listed above will continue at the same level in perpetuity.