There are a few important phases that you’ll cross through during a home purchase, and one of these that’s closer to the end of the road is known as underwriting. This happens when you’ve made an offer on a home that’s been accepted by a buyer — an underwriter will evaluate the finances of both you and the seller, plus note any issues, and issue a final approval of the sale.
At Altius Mortgage and our partners with Mortgage Ogden, we’re happy to walk clients through the underwriting process for any of our clients, including first-time homebuyers who may not be familiar with it. One of several areas we’ll assist you with here: Ensuring you don’t make any errors that may delay or even torpedo the underwriting process. Here’s how to avoid any such problems.
Be Completely Honest on Applications
Your mortgage application will be one of several documents an underwriter evaluates as they work. It’s important that everything on this form is completely accurate and honest; if there are any discrepancies discovered later, it could result in a delay or even denial of the loan. This includes not only income and employment information, but other personal data as well.
Not only this, but lying on your mortgage application is often a serious crime that can come with heavy penalties. So even if you think a small fib won’t matter, it’s not worth the risk.
Complete the Full Application
Another important concept for when you’re filling out your mortgage application: Make sure you complete the entire form. Leaving blanks or putting in “TBD” for key information is a major red flag for underwriters, and will likely lead to delays as they work to get this missing information from you.
It’s understandable if some areas are difficult to fill out (for example, if you’re self-employed and don’t have recent tax returns to show), but in general you should have most of the information required on hand. If not, it may be worth waiting to apply for a mortgage until you do.
Now, to be clear, this isn’t the same as knowing certain fields on the application that may be specifically meant for your lender or other interested party. These can be left blank, as they won’t impact the underwriting process itself.
Try to Avoid Major Purchases
While certain purchases in your life may not be avoidable, we recommend doing your best to avoid any major ones in the months before you apply for a mortgage. That’s because these can change your debt-to-income ratio, which is one of the key metrics an underwriter will look at.
A significant purchase could mean anything from a new car to expensive furniture; if you’re not sure whether something will be considered major, it’s best to err on the side of caution and avoid it (or at least put it off) until after you’ve gone through underwriting.
In general, you’ll want to avoid any situations that could increase your debt load or reduce your income in the months before applying for a mortgage. This will give you the best chance of getting approved with no issues.
Respond to Emails or Requests Quickly
Through the underwriting process, which typically takes between 30 and 45 days to complete, you may be asked to provide additional information or documents by your underwriter. It’s important that you respond to these requests as quickly as possible; delays will only extend the process out further.
In some cases, you may not be able to respond immediately (for example, if you’re waiting on a document from your employer). In these situations, it’s best to reach out to your underwriter and let them know what’s happening, so they’re aware of the delay.
Know Minimum Requirements for Fixers
One special note for any buyer looking into “fixer” homes, or homes that may need some work before they’re livable: There are different minimum requirements that must be met in order for an underwriter to approve the loan.
For example, a home must have a functioning heating system, and any electrical or plumbing work must meet local codes. In general, the home should also be structurally sound, without any significant damage that would make it unsafe.
If you’re considering a fixer home, be sure to do your research and understand the minimum requirements that must be met before applying for a mortgage. This will help ensure that there are no surprises during underwriting.
Small or Unusual Properties
Down similar lines, even if you’re not buying a fixer per se, certain properties that may be small or unusual can come with their own special challenges during underwriting.
For instance, a very small home (under 600 square feet) may not meet the minimum requirements for a mortgage loan. In addition, some lenders have strict guidelines on the types of properties they’re willing to finance; this can include things like vacation homes or investment properties.
If you’re buying a small or unusual property, be sure to check with your lender in advance to see if there are any special requirements or restrictions that apply. This will help you avoid any issues during underwriting.
The underwriting process can be daunting, but it doesn’t have to be. By following these tips, you can help ensure a smooth and successful transaction.
For more on this, or to learn about any of our quality home loan services and the best mortgage rates in town, speak to our team at Altius Mortgage today.