Here in this article, we offer five quick tips that loan originators can use to help prevent FHA mortgages from falling through during the processing. For some mortgage originators, these tips will seem incredibly basic. Unfortunately, conversations with FHA underwriters show me that many loan officers have not caught on to these ideas yet.
Ensure the FHA home loans Utah you are submitting makes common sense
Amazingly, this is one of the most common mistakes that are made by originators who entered the mortgage business within the last 5-7 years. Subprime programs usually only needed that the loan fits into the matrix & never cared about reasons person had credit issues. You have to ensure that you can express the good case that it makes sense to believe that this borrower can reasonably be expected to make payments on the loan. Often this needs asking a lot of bumpy questions of the borrower to ensure that you truly understand their situation. Even when your submission is approved by an automated underwriting system & theoretically underwriter needs only to validate information & doesn’t need to make the credit decision, the underwriter might find something wrong if the loan doesn’t make common sense. Lenders are held responsible by HUD for loans that default. They can always find the reason to override automated underwriting findings if they want to.
Check the CAIVRS number before processing your Utah FHA refinance Loan
CAIVRS is the abbreviation for Credit Alert Interactive Voice Response System. The CAIVRS system verifies that the borrower has not been banned from using the government-insured financing as the past defaulted FHA/VA mortgages, USDA home mortgage, student loans, or any of numerous other reasons. An amazing number of individuals are not aware that they have formally been excluded from the FHA financing. This commonly happens due to the ‘charged off’ student loans which the borrower might have long forgotten about & which also don’t show up on the credit report any longer. Just slightly less common are cases where the borrower’s ex-spouse was foreclosed upon & the borrower says they were not even aware of the situation. Strangely, this even fails to show up on the borrower’s credit report. Whatever your company’s process, you have to ensure to check CAIVRS (Credit Alert Interactive Voice Response System) as early as possible.
Collect all the correct documentation
You have to ensure that you have the correct documentation to support information that you entered into the automated underwriting system, or that was mentioned in the cover letter & borrower’s explanation letter. Surprisingly again, there are numerous loan originators who fail to think ahead tactically when compiling the loan submission package. The loans which started out with the approval from the FHA Total Scorecard often revert while in procedure to the ‘referred to underwriter’ status. This will occur much less often if the originators took extra few minutes to verify information that is being submitted for examining original paystubs, divorce decrees, W2s, bankruptcy filings, & other support documentation before turning the loan over to their processor.
Compute the income accurately.
Sounds obvious, but tales of VA home mortgage closings that fall through as the borrower’s ratio of debt to income is very high are legion among the real estate agents as they swear to never use that particular mortgage broker & lender again. Real estate agents & borrowers are reasonably amazed that such the basic element of the loan approval process can have slipped by the mortgage originator’s attention until so late in the whole procedure. There is one effective strategy to prevent this is to be very conventional in determining borrower’s qualifying income & not count bonuses & overtime pay when submitting loans for automated approval unless absolutely necessary. If the borrower has been qualified with less than maximum income that can be squeezed into the loan officer’s calculations, unpleasant surprises are less likely to occur.
Be sure you have ‘ALL’ borrowers assets listed & listed correctly
Loan officers normally fail to gather complete information on all borrowers’ assets once they have automated approval. Once again, the automated approvals are downgraded to ‘referred to underwriter’ status fairly frequently for numerous strange & different reasons. A good strategy for mortgage originators is to gather documentation for every dime in every account borrower has squirrelled away anywhere, but submit a loan through an automated underwriting scheme with the fewest assets necessary to get approval. When the loan is downgraded, later on, extra assets can often save the loan officer’s reputation. Another common mistake regarding assets has already been declared. The assets must be verifiably liquid. For this reason, FHA guidelines need that loan file include proof that assets would be available to the borrower without being fired or dying. In addition, due to potential withdrawal penalties, FHA loan guidelines will allow only 60% of the vested amount of account to be counted towards the borrower’s liquid reserves. Normally, the entire balance has been submitted into an automated underwriting system.
The above five tips would not guarantee your deal will go through underwriting without the hitch. After all, FHA guidelines seem to change daily now, but the little attention to these details will go long way toward improving your reputation among borrowers & real estate agents.