How can we make our loan process easier?

/in /by

Question of the week:  How can we make our loan process easier?

Answer: Be like Mark.

The loan process is not that hard, what is hard for many is the collection of items that are required for you loan to be approved and getting them to us so we can present to underwriting. This is made more challenging for many due to the pandemic restricting movement and personal interactions as the transfer of most of the items needed for loan applications is primarily done electronically.

For every mortgage application here is the basic list of items you will need to provide your lender:

  • Driver’s licenses, or other form of identification (i.e. passport)
  • Most recent year W2’s
  • Most recent paystubs
  • All pages of most recent two months’ statements primary checking/savings accounts, NOTE: if first page of statement says: “Page 1 of 4” we will need all four pages regardless of information on any of the pages
  • Mortgage statement for current residence/properties owned
  • Insurance statement showing premium and coverage for current residence/properties owned
  • HOA statement for current residence/properties owned, if applicable

Depending on your situation you may also need to provide:

  • Most recent year (possibly two) of personal federal income tax returns
  • Most recent year (possibly two) of business tax returns if you own 25% or more of a business
  • Two months’ statements for retirement or investment accounts if funds needed for closing, to be used for income or needed to show reserves

The list of items is a lot of pages, but not a lot of items. As well the list contains items everyone should have access to with relative ease.

Delivery of the items is sometimes the challenge, especially for those with no access to a copier or a scanner. Ideally, you have electronic copies of the items, or the ability to scan them. If this is the case, I use a secure cloud-based program and will open a folder we will share for you to copy the items to me.

If you do not have a scanner or copier then we need to have you provide me with the original documents for me to copy/scan and then return to you. With the current environment this is not simply dropping them by my office, as I likely will not be there.

If you wish to make your loan process easier, be like Mark. Mark was provided the above list of items, plus a few more due to this. When provided with the list of items we needed Mark quickly copied the items he could off various web sites, primarily bank statements, insurance information, mortgage, etc into our shared cloud-folder. He obtained an electronic copy of tax returns, scanned paystubs and W2’s and copied those into the folder and within a day we had all the items requested.

Once we have all these documents, we go through them to see if anything is missing, or if one document causes a question we will want to be answered, such as a large deposit on a bank statement or payment of a creditor not seen on our credit report. If this is the case, we will ask for additional items.

After the initial start of the loan package there will likely be some additional information requested when your file is reviewed by a processor, and then an underwriter. We try to anticipate what they may be requesting and ask for the items early in the transaction, but sometimes we miss things they find. If there is an additional request, here is where being like Mark is very helpful, ask questions as to why another document may be needed, but do not argue and say, “they don’t need that…” to someone with over thirty years in the industry. If someone is asking for it you can bet it will be something that can delay your closing if you do not provide it.

Our industry is packed with files right now, historically packed, and many people at all stages of the process are working from home. Our objective is to present to the underwriter the most complete file we can, so when it is opened for review the loan is approved with few, if any conditions that require more information or documentation from you. Due to the longer times in processing and underwriting we will likely need to update bank statements and pay statements.

Our application process is almost fully automated now with the use of DocuSign to sign application documents and disclosures. These are all very time sensitive. Be like Mark, when you see an email sent to you via DocuSign from your lender’s company open the item, review it and click to sign as soon as possible; especially once your loan is approved.

Some tips to make your loan application easier to process and underwrite:

  • Quickly respond to requests for documents
  • Monitor your email box for electronic signature requests
  • Keep all bank statements, pay statements and other financial documents through your escrow
  • If you are moving before your escrow closes, have a box or a folder for your financial documents, like pay and bank statements
  • If in doubt whether you think we need something, send to us
  • Return items sent to from escrow as soon as possible

There are three main factors that we see delaying a file in process or underwriting:

First, the borrower did not fully disclose something of importance. For example, borrower is getting or paying spousal support and there was a change in the amount being paid that will impact our ability to qualify. We discover this once we delve into bank statements to track payments.

Or perhaps there is another property that is owned. At the initial application interview client says they own no other property. Our initial pre-approval from Fannie Mae does not require tax returns. As part of our process we have to request from the IRS an electronic statement that is a line-by-line of your tax returns. When we get the results, it shows you have filed a Schedule E that shows other property owed that has expenses. “It’s not something we really use so I didn’t think it was important…”

Income you receive that requires you to file a Schedule C, other properties owned, regular deposits on your bank statements, or payments going out that do not match your credit report. All these, and others are bumps that could derail your loan approval, or cause significant delays.

Second, missing pages from bank statements. Actually, this should be listed first as it is the primary follow up item we need. On the list above of items needed, which is a cut and paste from message I send to all clients, you see the following, “NOTE: if first page of statement says: “Page 1 of 4” we will need all four pages regardless of information on any of the pages.”

A large percentage of our files have requests made back to borrowers, “can you please send me pages 2, 5 & 6 of your June and July statements for you accounts with your credit union?”

Often, we get the response, “there is nothing on those pages, one is just the legal stuff, another is an add and the last one is contact information.”

It does not matter if any of the pages are blank, if the first pages says “page 1 of 6,” or any page says “page W of Y” we need all pages from the first page to page 6, or Y that is labelled. The underwriter has no idea what is on pages 2 or 5 or 6; for all she knows one of these pages shows a loan not on the credit report, or a series of large deposits, or large transfers, or another account.

Third, respond and acknowledge requests for items or actions with a time frame when you will be able to provide what is needed. This not only lets me know you are aware of what is needed but also lets me know when I can expect what is being requested.

How can you make your loan process easier? Be prepared and be responsive; be like Mark.

Have a question? Ask me!

Rates for Friday July 24, 2020: Not a lot of rate impacting news this week. Rates move down slightly from last Friday for conforming loan amounts and up slightly for high-balance loans—likely due to lenders reaching their funding limits for the month for these types of loans.

We are still seeing large disconnect in the high-balance market from purchases and refinances, as well the spread remains larger than it has historically between “no-point” transactions and those with one or fewer points. Call for details and quotes.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS:

30 year conforming                                            2.625%   Down 0.125%

30 year high-balance conforming                   3.125%   Up 0.125%

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down with 740 FICO score for purchase mortgages.

Before I sign off, a thank you to friend, and agent, Mollie for suggesting that I put the question of the week in the email subject line so she can find topics easier to forward to clients and friends. Let me know if you like the crowded address line, do not like it, or don’t really care—in which case I doubt you would let me know!

Sounds like our Friday afternoons as since the initial restaurant shut downs in the state in March Fridays have been our night for takeout dinner. In the beginning there was lobbying for one place or another, then it morphed into someone say, “not that.” Now we are at the stage where someone will offer up, “How about we get _____ tonight” and it is met with either no response or “that’s fine.”

Have a great week,

Dennis

Past Weekly Rate & Market Updates can be found on my blog page at my website www.DennisCSmith.com/my-blog