Mortgage Underwriting and Final Approval
After you make an offer on a home, you will go back to your lender for final approval. This is when your file gets sent to the underwriter, the person who has the final say as to whether or not you’ll be approved. Here’s what you need to know about final loan approval in 2012.
Mortgage-approval and underwriting tips for first-time buyers:
Many first-time home buyers fail to understand the difference between pre-approval and final approval. Believe it or not, you can still be turned down for a loan even though you’ve already been pre-approved by the lender. Pre-approval is not a guarantee or a commitment to lend. The deal isn’t done until the mortgage underwriter gives his seal of approval.
You may be given a list of conditions to satisfy before the lender will issue a final approval. For instance, they may ask for additional documents relating to your finances. This is the most common type of condition. In some cases, they might even require you to reduce a certain debt obligation. I’ve had a lender tell me that I had to pay down one of my credit cards before I could be approved. Just be prepared for these conditions–it’s a very common scenario.
Keep tabs on your mortgage package as it goes through the underwriting stage. The underwriting process is the last and largest obstacle to final approval. Keep in touch with your loan officer about the status of your application. Make sure the underwriter has everything he needs to move the process forward.
Keep your financial situation stable between pre-approval and closing. A lot of first-time buyers think that they are “home free” when they reach this stage in the process. But that’s simply not the case. If you go out and buy a new car while your loan is still being processed, you could throw off your debt-to-income ratio. It might even result in your loan being rejected. Try to spend as little money as possible during this process.
At this point, the only good change to your financial situation would be an increase of assets. For example, if you made a contribution to your savings account, it would probably support your cause. The worst thing you could do at this stage would be to decrease your assets in some way. So keep your hands off your savings account until the loan is approved.
If anything changes with your financial situation, let your loan officer know about it. Remember, he or she is on your side at this point. The loan officer wants the deal to go through almost as much as you do. This is how they make a living. So you should keep them informed of your financial situation.
Have a backup plan in case the deal falls through. It’s common for mortgage loans to fall apart during the underwriting stage, especially in the current economy. Lenders are a lot more strict today than they were before the housing crisis. It’s not a pleasant scenario to think about, but you still need to have a plan in place. What will you do if your mortgage gets denied? How will it affect your current living arrangements?
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