Content of the material
- ADASHUN JONES REAL ESTATE
- How Mortgages Get Approved And Closed
- What Are Lender Overlays
- How Does Desktop Underwriting Work?
- WE FOCUS ON WHAT MATTERS MOST TO OUR CLIENTS
- DU Underwriting Recommendations
- DU Underwriting Approve/Ineligible Recommendations
- DU Underwriting Approve/Eligible Recommendation
- AUS FINDINGS
- What A Proof Of Funds Letter Looks Like
- The Bottom Line On Proof Of Funds Letters
- Desktop Underwriter and Loan Prospector
- Different Requirements for Different DUs
- Entering data in the liabilities section
ADASHUN JONES REAL ESTATE
1028 S. Main Street Fond du Lac, WI 54935 920-923-4433 800-838-1592
950 Witzel Avenue Oshkosh, WI 54902 920-235-0095 800-248-0099
529 Mill St. Green Lake, WI 54941 920-294-0121
N1788 Lily of the Valley Dr. Suite I Greenville, WI 54942 920-202-8360
How Mortgages Get Approved And Closed
Not all lenders have the same mortgage guidelines on government and conventional loans. Just because a borrower does not qualify with Mortgage Company A does not mean they cannot qualify with Mortgage Company B. All borrowers need to meet agency mortgage guidelines by either FHA, VA, USDA, or Fannie Mae, or Freddie Mac. This is done by getting an approve/eligible per DU Findings and/or LP Findings. However, lenders can have additional lending requirements called lender overlays.
What Are Lender Overlays
Overlays are lending requirements above and beyond those of FHA, VA, USDA, Fannie Mae, and Freddie Mac. Lenders with no agency overlays such as Gustan Cho Associates will only go off Automated Underwriting System Findings. Gustan Cho Associates ONLY cares about Automated Underwriting System Approval and has ZERO OVERLAYS on FHA, VA, USDA, and Conventional loans.
How Does Desktop Underwriting Work?
Mortgage loan originators request that borrowers complete an advance application, usually alluded to as a Form 1003. Some types of data you can expect to see on a Form 1003 are:
- Type of mortgage and terms of the loan
- Borrower information
- Details of transaction
- Property address and purpose of the loan
- Monthly income
- Real estate owned
- Employment information
The contributions to Desktop Underwriter relate to these areas of Form 1003. The program at that point utilizes this data, in addition to more than 75 outsider sellers, to decide if the borrower is an adequate financial risk and can be affirmed.
Desktop Underwriter is just in the same class as the data provided to the program; off base or missing data can harm your odds of endorsement. Likewise, DU does not address whether a loan consents to government guidelines; that part is up to the lender.
WE FOCUS ON WHAT MATTERS MOST TO OUR CLIENTS
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DU Underwriting Recommendations
DU Underwriting Approve/Ineligible Recommendations
These recommendations do not contemplate any extra credit hazard or different elements that may be related with the reason the advance is ineligible for conveyance to Fannie Mae. The lender must decide whether the reason behind the ineligibility makes an extra layering of credit risk that ought to be considered as the loan specialist settles on the guaranteeing choice.
DU Underwriting Approve/Eligible Recommendation
This recommendation fulfills Fannie Mae’s credit risk principles/evaluation and furthermore Fannie Mae’s mortgage loan qualification measures. Besides, it is also qualified for Fannie Mae’s restricted waiver of certain mortgage loan qualification and underwriting portrayals and guarantees, as long as the mortgage loan fulfills the material necessities identified with restricted waivers.
The readings from AUS are the following:
Approve/Eligible Per AUS:
- This means that the borrower has an automated approval
Refer/Eligible Per AUS:
- This means that borrower is eligible for a mortgage but the automated system cannot render a decision and needs to be manually underwritten by a human mortgage underwriter
- Refer/Caution means that borrower does not qualify for a mortgage
- It may be because they do not meet the mandatory waiting period after housing event and/or foreclosure
What A Proof Of Funds Letter Looks Like
A Proof of Funds letter must include the following:
- Your bank’s name and address
- An official bank statement, either printed at a branch or as an online statement
- Balance of total funds in the account
- Balance of funds in checking or savings account
- Copy of an online banking statement
- Might require the signature of an authorized bank employee or notary
- Includes the date that the funds were in the account
The Bottom Line On Proof Of Funds Letters
If you’re in the market to buy a home, you may need to provide a Proof of Funds letter to show the seller, or even your lender, that you have the funds needed to purchase the property. A POF is simple to obtain. Once your funds are all in one account, you can ask your financial institution to provide the letter, you’ll be one step closer to having the documentation required to buy the home.
As we’ve said, most sellers will also want to see that you have secured preapproval from a lender. That process can be quick and easy. Get preapproved today so you can start making offers!
Desktop Underwriter and Loan Prospector
When a lender underwrites your loan, they look at your ability to repay the loan, your credit experience, the type of property being financed, and the type of loan.
The DU and LP do the same thing, except that the process is automated through these systems. DU and LP take information input by a loan officer and compare it against Fannie and Freddie’s guidelines, respectively.
Different Requirements for Different DUs
The DU may call for certain debts to be extinguished or paid off prior to closing. It could disclose a short sale or a foreclosure, which could present issues in getting a loan approved, even if all the terms have been met.
The DU will list most revolving creditors, along with the unpaid balances and monthly minimum payments each creditor expects the borrower to pay. It's a snapshot in time of the financial debt and assets as reported by certain vendors and the borrower on the loan application. This is called a 1003.
Sometimes a borrower's lender will pull a Loan Product Advisor (LPA), formerly known as Loan Prospector. This is the desktop underwriting used by Freddie Mac; its requirements are somewhat different. For instance, the two-year requirement for employment could be reduced to one year on an LPA.
If, for example, a daughter is purchasing a home with her parents, a lender might use the LPA. It allows all parties to qualify as though owner-occupied instead of nonowner-occupied. Owner-occupied interest rates are lower than nonowner-occupied rates.
Entering data in the liabilities section
All mortgages and HELOCs that are auto-populated from the credit report are automatically identified in Section VI L of the loan application. To match a mortgage or HELOC liability with its respective property, select the property from the data field provided in Section VI L. The data field in the Full 1003 is titled “Related Property.” If the property does not appear in the list, enter the property address in the REO screen in the Full 1003 (as shown below).
With the information from a DU and LP in hand, borrowers and loan officers get a better idea of whether or not a loan will be approved.
That said, in reality, an experienced mortgage loan officer will know what documentation a borrower needs to provide in advance. Still, an automated underwriting system is a great way to double-check and avoid missing something before the loan goes to the underwriter.
Moreover, if you’re shopping for homes in a competitive market like Southern California, a LP or DU loan approval can help differentiate you from other homebuyers because it shows more detailed information than a simple pre-approval.