5 Causes for Delays or Derailments in Underwriting
All too often, buyers run into snags in the approval process because they were unaware of the requirements mortgage underwriters must evaluate for to ensure loanability. This can hold up the approval process and potentially put the buyer at risk for not being eligible for loan approval. There are several causes for delays, and even derailments, in the underwriting process. MHQ - Mortgage Headquarters is sharing with you a list of a 5 causes for delays or derailments in underwriting often looked over by borrowers to ensure a smooth approval process. Take a look.
1. Missing documents
One of the most common issues that causes delays in the underwriting process is missing documents. Document-related problems typically do not derail mortgages, but they can delay the closing process. So it’s important that you provide all of the requested documents in a timely fashion, and in their entirety. To make this process a little easier, we at MHQ Mortgage provide a general list of documentation needed to ensure a smooth application process. View our Application Checklist here.
2. Cash reserves
Another common underwriting problem is not not having enough funds in reserve. In some instances, a borrower may be required to have additional money in the bank, above and beyond the down payment and closing costs. These funds, known as cash reserves, are intended to cover the first few mortgage payments. But it’s important to note that not all lenders have cash-reserve requirements. Your lender will let you know if this will be a requirement.
3. Funds Not Sourced
Unsourced funds can cause delays as well. What this means is that the money set aside for the down payment cannot be properly sourced, meaning the underwriter cannot determine where the money came from. For example - gifted monies. If a donor gifts the borrower funds as part or all of a down payment, and doesn't provide a gift letter to the mortgage lender making it clear that the money is a gift and not a loan, this could be considered unsourced funding. The lender may also require the funds to be “seasoned,” which means they have been in the bank for a certain length of time. Both of these can cause issues during the underwriting stage.
4. Low appraisal
One problem that could potentially halt the mortgage process is a low appraisal. Before a mortgage lenders can approve the loan, they need to ensure the home is worth the amount the buyer has agreed to pay. A licensed appraiser will determine the current market value of the property. If the home appraises for less than the purchase price, the seller can lower the sale price or the buyer can pay the difference out of pocket. If the two parties cannot find common ground, the mortgage may be denied in underwriting.
5. Low equity
A problem that can arise for homeowners who are trying to refinance an existing mortgage is not having enough equity as collateral. Oftentimes, a homeowner will seek to refinance their current mortgage to reduce their monthly payment, make home improvements, or to help with other financial needs. However, they may not realize that their home's value doesn't cover the current market's valuation of the property. Unfortunately, this would be cause for suspense of the loan process.
Let's Look at the Numbers
If you're looking into your loan options, give us a call. We're happy to take the time to go through the numbers with you. Together, we can help determine a comfortable mortgage option and provide you with the information you need to ensure a smooth approval process. Reach out today. We've got more than 20 years of experience closing loans and making dreams come true, and can get you pre-qualified and help you choose a mortgage program that's right for you!
1. Missing documents
One of the most common issues that causes delays in the underwriting process is missing documents. Document-related problems typically do not derail mortgages, but they can delay the closing process. So it’s important that you provide all of the requested documents in a timely fashion, and in their entirety. To make this process a little easier, we at MHQ Mortgage provide a general list of documentation needed to ensure a smooth application process. View our Application Checklist here.
2. Cash reserves
Another common underwriting problem is not not having enough funds in reserve. In some instances, a borrower may be required to have additional money in the bank, above and beyond the down payment and closing costs. These funds, known as cash reserves, are intended to cover the first few mortgage payments. But it’s important to note that not all lenders have cash-reserve requirements. Your lender will let you know if this will be a requirement.
3. Funds Not Sourced
Unsourced funds can cause delays as well. What this means is that the money set aside for the down payment cannot be properly sourced, meaning the underwriter cannot determine where the money came from. For example - gifted monies. If a donor gifts the borrower funds as part or all of a down payment, and doesn't provide a gift letter to the mortgage lender making it clear that the money is a gift and not a loan, this could be considered unsourced funding. The lender may also require the funds to be “seasoned,” which means they have been in the bank for a certain length of time. Both of these can cause issues during the underwriting stage.
4. Low appraisal
One problem that could potentially halt the mortgage process is a low appraisal. Before a mortgage lenders can approve the loan, they need to ensure the home is worth the amount the buyer has agreed to pay. A licensed appraiser will determine the current market value of the property. If the home appraises for less than the purchase price, the seller can lower the sale price or the buyer can pay the difference out of pocket. If the two parties cannot find common ground, the mortgage may be denied in underwriting.
5. Low equity
A problem that can arise for homeowners who are trying to refinance an existing mortgage is not having enough equity as collateral. Oftentimes, a homeowner will seek to refinance their current mortgage to reduce their monthly payment, make home improvements, or to help with other financial needs. However, they may not realize that their home's value doesn't cover the current market's valuation of the property. Unfortunately, this would be cause for suspense of the loan process.
Let's Look at the Numbers
If you're looking into your loan options, give us a call. We're happy to take the time to go through the numbers with you. Together, we can help determine a comfortable mortgage option and provide you with the information you need to ensure a smooth approval process. Reach out today. We've got more than 20 years of experience closing loans and making dreams come true, and can get you pre-qualified and help you choose a mortgage program that's right for you!
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