YOU DID WHAT?!?! Five ways to disapprove your own mortgage

As most of us know, there are several basic criteria that are used to approve or disapprove a mortgage application. These include income, employment history, credit rating, debt-to-income ratio, property appraisal, etc. In metro-Atlanta, the typical mortgage application takes 3-6 weeks to process and, during this period, it is crucial that borrowers fully understand the process. If they don’t, they could inadvertently undermine their own application. Here’s how.

There are three principal players at the mortgage company – the loan officer (or mortgage originator), the loan processor and the underwriter. The loan officer takes the initial mortgage application from the borrower, reviews the credit report and other basic qualifications, provides information regarding loan programs, interest rates, etc. and advises the buyer of their loan options.

Once the application is complete, the packet is passed to the loan processor. This person is responsible for verifying information provided by the borrower, analyzing documentation, obtaining missing documents and generally ‘packaging’ the file. When the file is fully ‘packaged’, it is then sent to the underwriter.

The underwriter represents the final, and sometimes the most difficult, hurdle in the process. While all lenders want to lend (after all, it’s how
 they make a living), they only want to make good, solid loans with a high probability of prompt repayment. The underwriter is the person who makes this judgment, based upon the contents of the loan packet.

Once again, this is typically a 3-6 week process and, during this period, it is suicidal for a borrower to have any adverse changes to his/her situation; for example, losing your job, declaring bankruptcy, having a car repossessed, etc. Any adverse change can easily result in disapproval. One of the most common occurrences is discovery of new debt, thus increasing the debt-to-income ratio. How is it discovered? Through review of a second credit report which is typically ordered by the lender just a couple of days prior to closing.

We always tell our buyers that, until the day of closing, they should buy absolutely nothing….not new furniture, not a car, no vacation (where large sums are charged on a credit card), no refinancing of anything… nothing. Taking-on new debt is always serious business, and it’s just dumb to do it while a mortgage application is pending.

Today’s mortgage environment is much stricter than in the past and underwriters are under tremendous pressure to make only ‘good’ loans. Don’t cause your own application to be disapproved by doing something dumb.