Adrian Kleeschulte, Senior Loan Officer at Cornerstone Mortgage teams up with Doug to help explain what the differences are with Underwriting today versus 20 years ago.
An Underwriter is an individual that analyzes your documents to verify you meet your loan program’s guidelines and gives you the approval to close. Automated Underwriting is a computer system that takes a full loan application and then analyzes all the different layers of risk to approve or deny you. If you are approved automated underwriting will give you an approved eligible result which means you are approved and eligible with the guidelines. Along with an approved eligible result you will be given a list of items that you need to provide to verify the information that you put in the computer. After the processor has gathered everything on your approved eligible list, your file is then given to an underwriter who will go through and make sure everything on the list is present.
There are scenarios when the automated underwriting system doesn’t work. For instance, say the list requires two months of bank statements, when the underwriter sees the bank statements they may have large deposits that need to be accounted for. The automated system isn’t able to recognize this. Overall, the reason why an Automated Underwriting system is important is because it speeds up the approval process.
All banks that handle residential mortgages will have an automated underwriting system but it is important to work with a mortgage professional who knows what information to put in so that they can get an approval out. Make sure to listen in for more information on how Underwriting works and why it makes a difference for you.
Listed below are different guidelines between loan programs:
- Fannie Mae
- 5 years self-employed and only 1 year of taxes
- Credit Cards – won’t make you close the credit card if it is paid off to qualify -recent change that not all investors have adopted
- Allows Capital Gain income while Freddie Mac doesn’t
- Allows 5-10 financed properties, while Freddie Mac stops at 4
- 45.0% Max debt-to-income ratios
- Freddie Mac
- Will only ask for one year of self-employment tax returns
- Will accept higher debt-to-income ratios
- Non-Occupant Co-Borrower Income – doesn’t limit the income added by co-borrower. Fannie does not allow income from co-borrower to offset the ability for borrower to qualify.
- Will allow debt-to-income ratios over 45.0%
- FHA
- Used Fannie Mae’s underwriting engine
- Allows much higher debt-to-income ratios
Mortgages are very complicated. If you don’t deal with a true professional, then you may be at risk. Not all people in the mortgage business will dedicate themselves to studying all of the guidelines. Your loan may get denied when there is an easy solution that you lender didn’t consider. At Cornerstone Mortgage, we have very high standards for training. If you need advice on purchasing or refinancing a home reach out to Adrian Kleeschulte at (314)497-1122 or Doug at (314)472-DOUG (3684)
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