Too often when a borrower hears that their loan request has a conditional approved or commitment the belief is that everything is done. They may think everything “is a wrap” as they say in the movies. Hold the phone! Not necessarily so.
Conditional Approval is a rest stop along the path
The initial approval is only the beginning of the continuing journey.
Nope, the coast is still not clear.
You are immeasurably closer to the goal line. But, there are a number of exercises that must happen before closing, funding and recordation. Thankfully, these are all transparent to you, the borrower unless they become a problem.
Your income will probably be verified by submitting a request to the IRS that you signed at application. This is especially important if tax returns were used to verify income – if you were self employed or had more than 25% of your qualifying income generated from commissions or bonuses the verification must match your tax return figures.
A final analysis of your cash-to-close requirement will be recalculated. Should you be short of verified funds everything will stop in its tracks. More funds will have to be verified or the loan will have to be restructured. In either case your loan must make its way back to the underwriter for further review.
There is some debate whether lender’s underwriters run another credit report just prior to closing and funding a loan. We are told they do not do this unless required. The requirement depends on time frames from the date of the initial credit pull to the day of loan closing and/or funding. These time constraints must meet secondary market guidelines.
Towards the end, a call to your current employer will be made. The lender must be able to independently verify your employer’s phone number for this process.
Finally, your loan request will be reviewed for a “compliance” check sometimes by a third party vendor. With all the new regulatory guidelines that have been put in place this has become necessary. Disclosure dates and all compliance issues must be met.
Earlier, I mentioned secondary market guidelines, those rules that make the loan salable to either Fannie Mae or Freddie Mac or insurable by the FHA. Most everything we do to get your loan approved and closed is driven by these requirements.
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