The job of the mystery underwriter

The job of the mystery underwriter
Date Published: June 8, 2015
Kari McCoy

Dear Kari,
I am in the process of trying to buy a home. I met with my lender who requested a mountain of paperwork. After bringing it all in and making sure it was all up to date, I thought the hassles were done, but oh no, apparently that was just the beginning. The lender kept calling and asking for more papers, more bank statements and more letters of explanation. This has been going on for three weeks now and I have just about had it. I mean this is the lender’s job, why can’t they figure it out and make a list of everything in the beginning? Are all lenders this tiresome or is it just the one I selected? I am extremely frustrated and frankly if I knew up front it was going to be this stressful I would have just kept renting.

Answer:
I am sorry for all your frustration. Let’s look at how the loan process carries out.
Obtaining a loan begins with filling out a residential loan application (Form 1003). This form will ask you to provide information about your income, job status, history of employment and any records of outstanding debts. You may be required to bring in tax returns, pay stubs, bank statements, credit card statements and your employers’ information so as to verify your job, look at how much your salary is and how many years on the job. They will also look into your credit history, credit scores and spending history. The lender may also want to look into your rental payment history. You may also need a profit and loss statement.
Lenders have strict guidelines and standards that must be met. All your loan information is then given to a person who works for the bank or lending institution and their job title is underwriter. Their job is to make sure that the person being lent the money is actually qualified to pay it all back. They are to look for any past credit problems, late paid bills, bankruptcies, collections, foreclosures or short sales.
For security reasons the underwriter stays anonymous to both real estate agents and borrowers. The names of the underwriters are never revealed and they only work internally with the bank or lending staff. This may seem unusual as to how secret the underwriters’ anonymity is, yet this is put in place to protect everyone. The underwriter will also calculate your income, the amount of money you owe and decide if your percent of income verses your debt to income ratio is a good fit. Once all the information from the borrower is received, the underwriter looks over the entire loan package. During this time, the underwriter may ask for more documentation and once that information is received, it may lead to ask the borrower for even further information. This process may take two to four weeks, depending on how complicated the borrower’s file is and also depending on how backlogged the lending company may be at that particular time.
The underwriter must make sure the property appraises out at the market value and the amount of the agreed purchase price. The underwriter makes sure that the information is truthful and that there have not been any false or misleading claims made on the loan application.
A title search of the property will be carefully combed over to ensure the property title has no defects or title problems, including taxes, judgments or any liens or clouds on the title.
Finally the loan outcome will be revealed to you. Either you have the loan, you have been denied or you have been approved with conditions. Once you have met all the conditions then you will have full loan approval.

Kari McCoy owns the Kari McCoy Group, residential real estate at Lyon Real Estate. She can be reached at (916) 941-9540 or sold@karimccoygroup.com.