What do I need for loan application?
…And why is this additional information being requested of me? What are the underwriters looking for?
Thank you to J. Christopher Kennedy of 1st Mariner Mortgage in Downtown Baltimore for some answers to mysteries of loan application and approval process.
Why are you asking this?
Too often buyers who have worked hard to find the right home find themselves thrown into a state of confusion when it comes to the mortgage process. Though simple, the loan process is thorough. At times the process seems repetitive or redundant. There is a reason it seems repetitive. It is. While the loan officer, processor, and underwriter have three distinct jobs; each has the responsibility to insure that the documentation matches what is stated in the application.
What are the loan officer, processor, and underwriter looking for?
1. Income- Do they make enough money to pay the mortgage?
Are the W-2’s and pay stubs consistent?
Is the year to date income consistent with the pay rate?
Do they write off expenses on their taxes that reduce their effective income?
Are there any automatic deductions from their pay that might be for loans/child support/alimony that aren’t reported on the credit report?
2. Savings- Are they responsible and save money?
Is there enough money in the account for closing?
Are there any unusually large deposits? Large deposits must be explained so we know the buyer has not borrowed money or taken an advance on a credit card for funds to close.
Are there any automatic payments from the account that might be for loans/child support/alimony not reported on the credit report?
3. Credit- Do they pay their bills on time?
What is the score?
Are there any bankruptcies or collections on the report?
Are all accounts current?
Are there loans with deferred payments? If so, how long will they be deferred?
4. The Property-Is the house worth the contract price?
Does it meet the standards of the loan program?
Is the home safe?
Though getting a new loan is a more arduous process than a few years ago, it is still a fair one. If you make a decent living, save some, money and pay your bills on time; you can get a loan. Understanding what lenders require and why they require it will help make the process a smooth and efficient one.
Thank you, Chris, for this great information! Look for future mortgage posts from Chris, as a new contributor to my site!
I’m trying to buy a second home. My income to debt ratio was close according to the loan officer. So I said okay fine, I got my mother N law to cosign, her credit is through the roof, mine is around 840, My loan officer had to take a leave, another loan officer was finishing up, said everything was good, I was approved, the first loan officer came back, started wanting my electric bills, my insurance on my cars, and my current house insurance, wanting more money down, etc., I think she is trying too block me from getting the loan, what should I do?
Hi Richard, second homes are very difficult in which to get a loan. I had a client with a very similar experience, and he said to me, “It is like they don’t want to give me the loan.” I told him that was probably true — that they are doing everything in their power to make sure they have covered all angles in determining if you truly are able to make payments on both.
Because it is a second home, with foreclosures, it may be harder for a bank to recoup their losses, especially if the first loan is also in default.
I hope it works out! Good luck!