Hey, Kyle here with winthehouseyoulove.com.
Today were talking about what does an underwriter do exactly for your loan?
So you're going to learn three things.
Number one, why underwriting determines the fate of your loan.
Number two, how to make underwriting easier and number three, how long it
takes and the things that you can do to speed up the underwriting process
so you can get in your home quicker.
This is all about.
Making the home buying process, less stressful and helping you go through
it as quickly as possible because getting a loan isn't super fun.
We want it to be a joyful process to buy a house.
So we're going to talk about how you can ease this process up.
So first let's talk about a quick overview.
All right.
So let's look up here really quickly.
Think of it like a three stage process for underwriting.
So underwriting, a basic definition of what underwriting is, is the lender
needs to verify your information, to make sure that you can pay back a loan.
All right.
They need to make sure that if they're going to lend you $200,000,
that you have a high probability of paying back that $200,000, they
don't want to lose that money.
So there's, kind of a three-step underwriting process.
Number one, you have a computer approval.
So most loans are underwritten with computer software.
So the computer is first going to issue an approval based on the data that
you put in, in your loan application.
Then in step two the underwriter is then going to verify the information
that was put into the computer program.
Now, this has done in two stages that we'll talk about here, about three
fourths through this video, and then number three, your loan is approved.
So the computer verified your information, then an actual person,
actual human reviews your information, and then your loan is finally approved.
So let's talk about AUS.
AUS stands for Automated Underwriting Software.
And this is a software that's going to take all the information from your loan
application, and it's going to compare it to hundreds if not thousands of mortgage
guidelines, mortgage guidelines are just filled with tons of different rules on
what qualifies you for a mortgage and certain limitations and documentation
that you need for specific scenarios.
It can be really obnoxious, like some mortgage guidelines are 1,500+ pages.
So, what AUS is doing is it's taking the information from your loan application
and it is now comparing it to guidelines.
All right.
And then what it's going to do is it's going to give you an
approval or denial recommendation.
So the software, the guideline software, is now going to compare the
information that you put in on your loan application and say, hey, we
think this fits all of the guidelines.
So after the underwriting software says, hey, this fits the guidelines,
then an actual human has to review that information because here's what
happens is on your loan application.
You might put in that you make $50,000 per year.
That's great.
But the computer can't tell if you actually make $50,000 per year or not,
the underwriter has to actually look at your pay stubs, W2's, maybe tax returns
to see, do you actually make $50,000?
And if so, they will green light basically what that underwriting software is saying
so you can get a final loan approval.
So the underwriter is going to check over your income, your employment
history, credit, and debt to income ratio the appraisal, the money that
you have for your down payment and then title, insurance, I have appraisal
in here as well, but they're going to check the property to make sure
that it meets lending guidelines.
So you can see you have this kind of two phase approach of
looking at these guidelines.
So you have these big organizations are these big entities that
are setting up these rules.
So you have people like Fannie Mae, Freddie Mac, FHA, VA, USDA,
they're setting the guidelines.
They're setting up thousands of pages of what qualifies you for mortgage.
You're putting in your loan application and a software is comparing your
application to all of these rules.
And then if you get an approval through the software, an underwriter,
an actual human is going to double check everything and make sure that it
actually is a loan that can be approved.
Now not all loans are run through AUS.
Some are done through a process called a manual underwrite.
And in a manual underwrite, this is where the underwriting software either says,
hey, we can't really get a good idea of the risk of this loan or flat out, we
just won't do an automatic underwrite.
And there are certain guidelines that, you know, Freddie Mac and Fannie Mae and
FHA, USDA and VA have for being able to give an automated approval and I'll make
a future video about manual underwrites.
They're a little bit more document heavy.
They can also have a higher interest rate to them, but the benefit is you don't need
a credit score to get a manual underwrite.
Okay.
Something that's huge here is that an underwriter is the only person who's
going to approve or deny your loan.
A loan officer will not ever approve or deny your loan.
They do not have the authority and capacity to approve your loan.
So if you ever feel like you need to talk about a financial scenario with your loan
officer know that your loan officer is on your side, they don't get paid most of the
time, unless they help you close a loan.
They are your advocate to the underwriter.
Okay.
So kind of think of them as your go-between.
So you have the underwriter, then you have your loan officer
and then you have you, okay.
There should be this communication channel where you and your loan officer
are talking, and then the underwriter and your loan officer talking, you'll
never be able to talk to the underwriter.
In most circumstances, you're gonna have to talk the loan officer
and the loan officer is going to be advocate to the underwriter.
Now, just a quick side here.
Iif you go to winthehouseyoulove.com/free.
I have a PDF that has seven different ways that you can save money on home.
And they're like actual strategies that I use with my clients to help them
save money on their mortgage and their overall property investment as well.
Okay.
So normally you're going to have two rounds of underwriting and they're
not really called rounds, but we'll kind of think of them this way.
The first one that you have is you have your initial approval.
So in the initial approval, This is where you're under contract for a
home, or you start a refinance and you take your loan application and
you submit it to your loan officer.
And then your loan officer probably is and ask for some documents, the loan officer's
going to submit your loan application and documents to the underwriter.
And the underwriter is going to review everything.
And then they're going to come back with a conditions list.
Okay.
So we're going to refer to this as conditions.
So the underwriter basically says, hey, we'll approve the loan.
As long as you meet the following conditions.
And it's usually a list of it can be anywhere from two things.
It can be up to 20 things.
I mean, it could be higher than that.
Depends on how much was submitted in the beginning.
Then you're officer's going to ask you for those conditions and
then ideally everything would be cleared in that second round.
And then you may have another round of underwriting depending on what
information was or wasn't given in here.
Okay.
So that those conditions are that second round of review.
All right.
So you put in the documents and information to the underwriter,
they gave you an initial approval, then you re-sent in new conditions,
and then hopefully they should give you this final approval at the end.
And I know that my handwriting is awful.
So a tip here really quickly is when a loan officer asks you for information
or when a processor is asking you for documents, send in everything
that you can as quickly as you can.
Alright.
Sometimes what happens is I'll ask clients for documents at the
very beginning and they'll take a week or two to send me documents.
And what they don't realize is every day that they send a document earlier to me
is a potential day that we close earlier, or think of it this way every day that
you wait to send an in a document, could push your closing back one day further.
Okay.
So you want to submit every single thing that you have, because if a
lender is asking you for documents or for information, most likely they're
waiting on you, there's nothing else that they can really do behind the
scenes without that information.
So send everything you can send it quickly and also send it cleanly.
What happens a lot of times is I'll ask for documents from people and they'll just
go take loose pictures of documents and then text them to me or send me 20 emails.
I can't look through all these and, you know, effectively organize them.
Cause sometimes that will take me up to an hour if they're sending
me this huge document package.
It is really not that hard to open up a scanner app on your phone or download one.
Put them all in PDFs, organize them, label them.
This is my 2018 tax returns.
This is my 2019 W2's.
This is my past 30 days of paystubs.
It's not difficult to do that.
It's going to help your loan get processed a lot easier and prevent somebody from
having to re-ask you for documents because it's not easy on the lender side
or the loan officer side, when people are sending 20 plus emails to them times
however many buyers they're working with.
Okay.
So keep that in mind.
That's gonna help your loan be a lot less stressful and go through a lot easier.
Also, don't open any credit lines and don't make any big non-payroll
deposits in your bank account.
Okay.
So you don't want to go open a credit line, you know, don't go buy
furniture, don't get a car because those are going to change your debt
to income ratio and your credit score.
Also, you don't want to deposit a bunch of money into your bank account that
can't be verified because what's going to end up happening is the lender won't
be able to use those funds if they can't verify the source and where it came from.
So again, this is where you can talk to your loan officer if you
need to do any of these things.
If you need to open credit or you need to make a deposit in your
bank account, your loan officer is your advocate the underwriter, they
know what to look for and can help you come up with a plan before you
actually do any of these things.
So.
Let's go ahead and have a CalmMoment because the goal here is for you to have a
calm plan and a soft focus moving forward.
So the underwriting process can be one of the most stressful parts about getting a
mortgage, because this really is where the fate of the loan kind of comes into play.
And the underwriting process can be pretty long you know, most
homes take about 30 days to close.
And the majority of that time is spent in underwriting because they're
trying to collect a lot of documents, so it can be really stressful.
So just know if you're feeling stressed, it's perfectly fine to
talk with your loan officer and ask for their expectations about things.
Hey, you know, this is taking a certain amount of time.
Is this normal?
Hey, is there anything else that you need from me?
You don't have to keep checking in and saying, is everything okay?
But hey, is there anything that I can do to make the loan easier for you?
It's perfectly fine to ask those things and to let your loan officer know,
hey, I'm kind of feeling stressed about this could you give me an update or
could you clarify these things again?
They work for you.
They are the advocate between you and the underwriter.
Their goal is to help you get that loan.
They're not there to try to squash the loan.
Okay.
Something else to look at to make things easier is looking at possibly a
shared folder with your loan officer.
Okay.
So make sure number one, that this is secure, so it's protected by a
password or something like that.
But, look into using it online shared folder to be able to upload documents
to your lender instead of over email.
And this is if your lender doesn't have a place to upload documents, you know,
for instance, we use a document portal.
So people can upload documents securely in their accounts, but some lenders, don't
have that and they just request things over email, which is not very secure
and it's difficult to keep track of.
So having a shared folder, one place where all of your documents are,
makes it really easy to be able to see what the loan officer has access
to, and then you can always refresh that and the lenders always can have
that link ready when they need it.
Also, this is kind of a joke, but you don't need to send a blood sample.
I know underwriting can be stressful and it's going to feel like they're
asking for so much information.
I had a lady once who did ask me, she was like, do you need
me to send a blood sample too?
Because it can feel like a lender is asking for a lot and
I get that it's frustrating.
It's part of the process nobody's picking on you.
You know, you're not different than all the other people who are
getting asked the same things.
And if you want to, you're welcome to go look at the 1,400 pages of guidelines
that show you why documents are being asked for from these government entities.
It can feel like a lot.
But ultimately the lenders are only asking for things because they are
legally required to ask for those things.
They're not trying to pick on you, even though it can feel like that sometimes.
So the best thing to do is try to bear through it, send in as much
as you can, again, send it cleanly incident as quickly as possible.
That's gonna help your loan get processed a lot quicker.
And then finally ask your lender about turn times, and this is going to help
manage your expectations of how long the underwriting process is going to take.
So it turns items are how long it takes an underwriter to review
your initial approval and the conditions that you submit in.
So for instance from the time that your initial documents are submitted
to the underwriter, it might take two days to hear back from the underwriter.
Okay.
So underwriters with each lender normally have their posted turn
times, so they can give an expectation for how long it's going to take
your loan to be underwritten.
Same thing with reviewing conditions.
They'll let you know how long it's gonna take to review those conditions.
Now, most of the time the lender isn't going to make that public to the buyers.
But if you ask your loan officer and just say, hey, how long do you think
this is going to be in underwriting for.
Then you can get a better idea of, okay, if it's going to take three
days, then I'm not going to bug my loan officer every single day until,
you know, to get an update on what's happening with the underwriting process.
Okay.
So piecing this altogether, if you want to go through the step by step plan
to buy a home, this video over here is going to help you understand how
the underwriting process integrates with everything else in this video.
Take care.