Tips To A Smooth Sailing Mortgage Transaction

Consumers should be aware in obtaining a new mortgage there no longer exists the “exceptions” prevalent in the recent past. Today’s mortgage banking landscape has lenders approving loans with fine tooth accuracy. In many cases they are adding overlays before approving a deal. When a lender approves and funds a mortgage, the loan typically gets sold on the secondary market within a few days. Loans under go a “post closing” process. A post closer reviews the file to be certain all conditions required by the investor are met and documented.

What happens if a good file is missing a few docs? Consumers have no impact as the closing is a binding contract. The impact to the lender is a different story. It is why they can become overly cautious when approving loans. After a post closer delivers a closed loan package to their investor for purchase, the loan file is yet again examined for standards and compliance. If for any reason the investor feels something is missing they can decline the purchase. Let’s say the lender has 4 loans in the pipeline that average $400k each. If the investor refuses purchase it has become problem in excess of $1,500,000.00. Lenders have a limited capacity for credit. Until loans are purchased by their investor these deals remain on the lender’s credit line. The backlog could easily prevent the funding of other loans.

Is it really that difficult? In most cases it shouldn’t be. Things have become more difficult of late for bankers and consumers alike. Working in harmony with your lender will significantly ease frustration and make the process as smooth as sailing on calm waters.

What can you do to help? First and foremost, understand your loan will be documented much more than any loan you’ve had previously. There will many more documents and requirements. Be prepared.

1. Don’t buck the system – In other words, "Just Do It". If your loan officer requests a document that you feel is unnecessary because you’ve never provided it before, just do it. Bear in mind the aforementioned "overlays". Banks and lenders want to be certain the file is as “tight” as possible. If an underwriter is asking for a document, just do it. The days of arguing underwriter conditions are over.
2. No New Credit or Large Purchases – New guidelines call for lenders to pull credit once again just before your loan is scheduled to close, even after the loan is approved. Federal law states consumers must wait three business days after a refinance closes before the loan actually funds. Lenders can will pull a new credit report during this period. Any new debt or credit inquiries may kill or delay your closing. The same goes for employment. Do not quit your job while getting a mortgage. Lenders will call your employer for a final verbal authorization before funding. Changes in employment will kill your deal.
3. Disclose everything. Anything at all you believe could have a negative impact on your loan must be disclosed during the application process. Gap of employment? – Make sure you explain it. Verification of employments are done on every single loan. If there is a gap of employment, lenders will find it. Disclose and document up front. This may not be a deal killer but without disclosure, it will raise a red flag. Other issues to bring up would be: alimony, child support, loans from your 203k, wage garnishments, existing judgments or liens, 2nd mortgages and lines of credit an other people on the title with you. Be sure to add pretty much anything else common sense would dictate as a potential issue to underwriters.
4. Home values may insult you. Many consumers take it personally when an appraisal comes in much lower than expected. If the deal still works with the low appraised value – just let it go. The object of your financing is to accomplish the deal based on the loan proposal you approved. I have seen too many clients argue about an appraisal that has no affect on the outcome of the loan. If a low value does not alter the outcome of your loan don’t fret, move on and close the loan.
5. Time is of the essence! Mortgage rates are locked by number of days expected to close, fund, record and deliver to the investor. When a loan is agreed upon between consumer and loan originator and becomes a locked loan, the clock starts ticking. Be prepared with necessary documentation and begin the process immediately. If your loan does not close within the lock period it could cost in extension fees. When you make a commitment to a mortgage move quickly to supply requested documents.

Bonus Smooth Sailing Tips -

These documents should be part of every loan package and as new documents get updated should be forwarded to your lender:

• 30 days most recent pay stubs – continue to forward any new pay stubs received during the loan process.
• 3 months bank statements – ALL pages, even if some pages towards the end of the statements are blank. Internet statements many times are not acceptable because consumers names and or complete account numbers are usually not complete or missing.
• Sign all disclosures supplied by your loan officer. Believe it or not, a missing signature not found until your loan file hits the closing department can stop your deal in it’s tracks. Be thorough when reviewing your loan disclosures, be certain to sign and date all documents and call your loan officer if you have any questions or concerns before signing.
• Gather your homeowners insurance information including your agent’s name, phone number and policy number. A declaration page is typically sufficient.
• Find your last settlement package which includes the hud settlement sheet, note and title policy. These items may come in handy during the loan process and could possibly even save you money. If you have the original title policy when you purchased your home, send it to your lender as they may be able to get a discounted reissue rate on title insurance.

Bottom line – The mortgage market is much different than ever before. Educate yourself and communicate well with your lending professional. Loans are still getting approved every day! It’s starting to sound cliche, but it’s true, "rates are at historical lows!"

Photo Credit: Joey Gannon