June 12, 2018

You’re PreApproved, What’s Next?

So you’re PreApproved for a mortgage loan, congratulations! Now what do you do? If you haven’t started your house hunting, that’s going to be your first step. You can confidently hold that PreApproval letter in hand and go out searching. On the other hand, if you’ve found a home that you’d like to put an offer in, there are a series of things to expect.


You’ve found the home. Next, you’ll enter into an agreement with the seller and the lender will open the loan file and order an appraisal on the property.  Also, the lender will order an inspection and review the market activity to determine if it serves as sufficient collateral for the loan.


Conditional Approval

The underwriter will review  the file and issue a conditional approval, meaning the file is approved, but there are conditions that have to be satisfied before we can close.


Collect/request docs for final approval:

  •         Sometimes there are additional requests for the borrower, other times there are only items to collect/work through on our end.

Submit to underwriting for Final approval:

  •         After all conditions have been collected, we submit back to underwriting for final review, at which point we can issue a Clear to close and move on to closing preparation.


Final Approval

Once all parties within the transaction satisfy their portion of the loan approval process, this includes appraisal, escrow instructions and borrower financials, title research, and lender compliance review, the lender will issue a final approval. What is the Final Approval? This is the commitment on behalf of the lender to fund the loan. This commitment is met once all underwriting guidelines have been met: verification of necessary income, assets, employment, and property information.  

Closing prep

  •         Request docs from the closing department
  •         Issue a CD (Closing Disclosure) 3 days prior to closing


Before Closing–what NOT to do

Everything is done, at least it seems that way. However, until closing, the home isn’t yours. There are things that the borrower can do to create complications. Here’s a list of things NOT to do before closing.


1- Don’t apply for new credit. Applying for new credit can change your credit score, which could affect your interest rate.

2-Paying off debt. That seems weird, right? Paying off debt sounds like a good thing. And it is, but also creates questions such as: where did the money come from to pay off that debt? Were cash reserves used to pay off the debt?

3-Job/Career change. Making this change during the underwriting process can create further verification and documentation. You will need pay stubs to prove salary.

4-Major purchases. Making large purchases on credit will affect your debt-to-income (DTI) ratio. Even if you use cash to make such purchases, this will affect your cash reserves, which could impact your down payment.

5-Co-signing on a loan. Seems like a fairly innocent deal, you’re just co-signing. But in reality, you’re increasing your debt-to-income ratio, if it’s a new loan. If it’s an existing loan and you can show 12 months of cancelled checks showing the cosigner is paying the debt, you may not have an issue. But bottom line, don’t get involved in any loans without speaking to your lender first.


Closing Day!

The day is here! Time for the borrower to meet with a Notary Public or escrow agent and sign all of the legally binding loan documents from the lender. Next, the borrower will provide his/her share of closing costs and loan funds and then the title is transferred to the borrower!


For veteran homeowners, this process is not new or surprising. But for new homeowners, it’s important to know what to expect and what to avoid doing during the process. If you ever have any questions, The Michael Shotnik Team is here to answer them and help in any way!


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