Mortgage Loan Underwriting

Mortgage Underwriting
Underwriting guidelines determine what home loan options you have for your type of financial needs. Also understand your loan qualifications, based on four major factors.

1. Credit Report
2. Debt-to- Income Ratios (DTI)
3. Down payment or equity
4. Compensating factors

After completing your loan application, disclosures, gathering all the supporting documents from you, receiving the appraisal, and title work your loan is ready to be underwritten. A trained professional (underwriter) reviews all the information provided by the broker.

I'm here to help you understand the underwriting guidelines that will determine what your mortgage loan options are for purchasing or refinancing your home. You will understand mortgage loan qualification based on the four major factors a lender considers; your credit history, income vs. debt, down payment or equity, and compensating factors.

You will learn:

• What loans you do and do not qualify for and WHY
• The loan process including major Do's and Don'ts
• How to prepare in advance to get approved
• Credit repair and how to increase your credit score

The most important section here is How to Select the professionals* you will be doing business with. I cannot emphasize this enough. Even if you know NOTHING…, the right Mortgage Broker, Real Estate Agent, Closing Company, Appraiser, Home Inspector and Moving Company will get you into a home

This is what makes the mortgage business seem so inconsistent. You have read the basic guidelines and normally they are followed to the letter, but all customer portfolios are different and nothing is so black and white it is set in stone. If you have three very strong factors they can compensate for one area where you may fall outside the guidelines.

One very good example of this is Debt to Income Ratios. Most loans today are sent through automated underwriting programs that grade your application and approve or don't approve your loan. (Desk Top Underwriter, Loan Prospector, Desk Top Originator) A good example is a couple who had a 60% total debt to income ratio and were approved for a $200,000 Fannie Mae Loan. Fannie Mae back ratio max is 36%. Their compensating factors were: Each had 18 years on the job, Each had retirement accounts over $150,000, and both had credit scores over 750. Without those three factors they would have been turned down for the loan.

So, nothing is really set in stone. Compensating factors can be any of the following provided they are very strong. Ratios, credit score, equity/down payment, assets, and time on the job.

You can see why it is very important that you get an experienced loan officer

Here are the factors in every Loan or the 4 C's

• Credit
• Collateral
• Capacity to pay the loan
• Character - willing to pay the loan

The collateral is the most important factor to approve a loan; Capacity to pay the loan and the willingness to pay the loan is second. Credit is determined by your FICO scores, your mortgage or rent history, and last your unsecured debts or consumer debts.