Underwriting Exposed | It’s Not the Underwriter, It’s Your LO (Demo)

seattle fha underwriting guidelines[The phone rings] “Good Afternoon, this is Dan Keller…”  [The caller] “Hi, Dan this is Todd, over at Weller Killiams Realty, I have a 9-1-1 and  need your help again.  The buyer on one of my listings was declined by their bank, and I need to see if you have any “extra rabbits hanging out in your hat” again for me?” 

I didn’t set out to brand myself as a  miracle worker, but recently, I’ve been tagged as the loan officer that can evidentially “walk-on water”.  I hate to break it to my Realtors, but I am not a magician nor can you find the letters “JC” found in my first and last name.  I am however a “student of the game” and completely understand how an underwriter looks at a borrower’s credit report and loan application to arrive at an “approval” rating.

Most of the previously “declined” loan applications that I see from other Realtors share two common traits.  (1). Items or issues with the credit report that could have been addressed upfront; and (2) Misinterpretation of loan program guidelines.  Having an “underwriter’s mindset” is essential to a loan officer’s success in funding loans and closing on-time.   By interpreting a credit report, fixing credit when needed, and understanding how to give an underwriter what they want, you can get loan approval 100% of the time you enter into underwriting (and even close on-time). 

MYTH:  It’s Too Hard To Get A Mortgage Today

Underwriting should NOT be stressful.  If your loan officer understands the product they are selling (FHA 203k, VA, USDA Rural Development, Condos, FHA Jumbo, and Super Jumbo for example), then once they submit the loan application for approval, there should be full confidence in the fact that the borrower will be issued a conditional approval within 2-5 days.  If the loan application is submitted properly and clearly including to a “T” all items requested on the DU approval, then the conditions for loan approval will be minimal. 

Did you know – Outside of the appraisal, you are given upfront EXACTLY everything the underwriter needs to approve the loan.  The loan officer uploads the loan application to an automated online underwriting program called DU or desktop underwriting.  This automated program takes the information on the borrower’s credit report along with the financial data uploaded from the borrower’s loan application and computes “Approve/Eligible” findings.  These EXACT items are the items that the underwriter will request, and that is it. So, essentially, you know the answers to the test in advance.

Realtors that understand their product (Real Estate) is important too.  Some of the best transactions that I have been a part of are transactions that have encountered issues with the appraisal.  But the Realtor planned ahead knowing in advance that the appraiser may “call out” certain items, and we were able to address them prior to sending the appraiser out.  You see, if the appraiser documents an item to be addressed or repaired, it is then brought to the underwriter’s attention, thus holding up the transaction until the items are thoroughly addressed and re-inspected and re-underwritten.  See FHA Property Guidelines Tool Kit for Real Estate Agents.

MYTH:  A 30-Day Closing Is Unreasonable.

Underwriting SHOULD NOT cause ulcers, male pattern baldness, or binge drinking.  In today’s banking and lender environment, you should expect to wait 2-5 days for underwriting approval.  I would ask your lender for the DU approval upfront, and ask the loan officer if he has talked to the borrower about any of the items addressed on the DU approval.  If every item on the DU approval is accounted for, there is no reason why a mortgage loan cannot be originated and funded in less than 20-25 days. 

If you have any questions on this blog post, or are feeling like underwriting has turned into a waiting room like my friend Todd Waller, Realtor in Plymouth, Michigan describes in a recent blog post, please free to message me below, or contact me at dan.mortgageadvisor@gmail.com

Photo credit: AP/MLB.com