What goes into getting a Mortgage Approval
When the offer has been accepted, the next step is mortgage approval. Let your mortgage advisor know right away that your offer has been accepted.. At this point, if you are pre-approved you can lock in your terms including your rate and the loan will start to be processed.
What if you aren’t pre-approved already?
Your mortgage advisor will quickly get the loan application started so that you can get mortgage approval fast.
What happens next?
A copy of the fully executed contract is sent to your mortgage advisor for review. Your mortgage advisor then orders the appraisal to make sure the property is worth the sales price and can be financed for the loan amount requested. You also need to start thinking about getting some home insurance quotes at this point since you will need to have insurance in place to complete your purchase.
After this your application and complete documentation will be sent to the processor to get your file ready for the underwriter. The file will then be submitted to the underwriter for review to insure it meets the lender’s requirements for the loan. The underwriter will determine from this if you will be accepted or declined for the loan.
The underwriter evaluates your debt to income ratio to make sure your income is large enough to cover your mortgage payments and debts that you currently have.
Your debt to income ratio should be 45% or less of your gross income. In some cases this percentage can be higher depending on compensating factors like a high FICO score, large down payment, or liquid assets.
The underwriter will look at your credit score and evaluate how consistent you have been with payments or if there are inconsistencies what will the likelihood of those patterns happening in the future.
The underwriter will also review the appraisal provided to insure it meets quality control and is at or over the sales price on the contract.
When purchasing your home the underwriter will want to know the source of your down payment. Depending on the loan being applied for this can range from 0%-20% as a down payment. If the loan down payment is less than 20% you may need to have private mortgage insurance on your loan which can increase your monthly payment. Be sure to consult with your mortgage advisor on options without mortgage insurance with less than a 20% down payment.
The underwriter will also verify that you can cover the closing costs of the home either through the lender or out of pocket cash for the closing expenses.
In summary, make sure that you have a clean financial history, credit score, a source-able down payment, funds available for closing fees, and ideally low consumer debt. These will all contribute to your mortgage approval.