(1) Submission to Underwriting:
At this point the fully executed P&S and all of the necessary mortgage disclosures, down payment, income and identification documents are submitted, or sent, to the underwriter for review. For many, this is the most nerve racking part of the process. Borrowers really do not understand what is happening to their file. It’s a sort of hurry up and wait period while your loan file waits its turn in line to be reviewed by an underwriting. Think of your loan file waiting in line for the underwriter much as you would wait in line at the supermarket for your deli meats. You take a number and wait to be called.
(2) WAITING for Underwriting Review & Decision:
This can be anywhere from 3 to 15 business days depending on how busy the mortgage lenders are & what type of loan program you have applied for. Try not to worry. No news is not bad news, it’s just no news. Your lender will notify you as soon as they have made a decisions. The appraisal is also ordered during this waiting period.
(3) Loan Decision: The underwriter will issue either an approval or denial. In the case of an mortgage approval, there will most likely be additional, follow-up documentation requested – cancelled deposit checks, updated paystubs and bank statements, proof of homeowner’s insurance, etc. All of these requested conditions must be submitted back to the underwriter for their final approval in order to get your loan in “clear to close” status.
The appraisal is ordered within a few days of the mortgage loan being submitted. Because of new federal regulations your loan officer is not permitted to have any direct contact with the appraiser and any attempts to do so by the loan officer or buyer could result in the denying of your file.
The appraisal is most commonly ordered by a third party management company and then given to an appraiser who is familiar with the specific town you are looking to purchase in. The appraisal cost will determine on the type of loan and type of property type. Important: FHA appraisals, jumbo loan, and multi-family appraisals cost more than traditional single family homes, so ask The Mortgage Buddy for an estimate.
What an Appraiser Looks At:
- Property is compared to homes of similar style, size, age, & condition that sold within a close proximity to the subject house
- Evaluates the similar property’s sale price, days on market, sales terms
- Makes adjustments based on sq. footage, bedrooms, bathrooms, and other amenities
- Makes adjustments based on condition of the home – foundation, heating system, electrical system, upgrades, construction quality
The appraiser will evaluate all of these factors and review the purchase and sales agreement and come up with their opinion of value. A detailed report will be sent to the mortgage lender and buyer with the value result.
There are usually 3 possible outcomes as a result of the property appraisal.
(1) The home appraises at or above the purchase price of the home – the purchase transaction proceeds as planned;
(2) The home appraises for less than the purchase price of the home – the terms of the transaction need to be re-evaluated and renegotiated;
(3) The home would appraise for the purchase price of the home, BUT it has safety issues or repairs that need to be made. This is called a “subject to” appraisal. The property will need repairs and must re-inspected by the appraiser and signed off on before the lender will be able to utilize this appraisal
Mortgage Buddy Appraisal Tip: Make sure to discuss potential condition issues with property you want to purchase. Some types of financing such as FHA insured loans will have tougher appraisal guidelines than many conventional loan programs. Things like roof damage, peeling paint, missing siding and lack of adequate hand rails are just a few of the more common items that are frequently seen and cause an appraisal to be made “Subject To”.
Mortgage Buddy Underwriting Tips
- Plan on providing a ton of documentation
- Do not fax a copy of your license either scan and email or take a picture with your phone. A fax is almost always too dark.
- Provide any additional requested documentation quickly, completely and exactly as requested
- Don’t get frustrated with the process – they are not picking on you, the underwriter is just following the requirements set out by Fannie, Freddie and FHA