The Underwriters Would Like To Ask… 

Bankrolling It For Real: Full Mortgage Underwriting and You (and Your Property)

Remember that a lender’s approval of your mortgage application comprises two parts: the property’s market value as an appraiser sees it and the overall financial potrait a lender prepares of you.  This section focuses on the ‘you’ part.

Once we’re in contract a lot will happen in different arenas a lot of it will some repetitive but this time around it matters as the end result isn’t a pre-approval letter but the approval to the actual loan. 

This is when the lending process will begin and things get real.

Up until COVID, loan approval times went from anywhere as few as 8 days in the before times, to as much as 27 days for a single-family house or condominium loan in the post-COVID era. If you’re getting a TIC loan then the escrows can drag on for well over 45 days if not longer.

After easy approvals led to the 2008 housing financial crisis, underwriting and vetting have really come a long way going from the highest levels of scrutiny and requirements anyone had seen to the middle ground these days. Lenders may end up examining every money transfer, credit report entry, and income source on their way to approving you. The down payment itself has to be traceable and documentation is the name of the game. 

So until we have keys, be prepared to be responsive when it suits the lender (a lot of hurry up and waiting), strange requests, surprises and the potential need to answer the same questions over and over. Our advice: just keep smiling as it will be worth it. 

NOTE: Having your FICO Score ahead of time puts you in the best position to negotiate loan terms. A 100-point difference on your FICO Score could save you $40,000 on your mortgage over time, so make sure it’s accurate and correct. A single missed credit card payment, for example, can knock a score down by 50 points, which can change a lending scenario by thousands of dollars.

What’s your score?

Step 1. The Application

The key to the loan process going smoothly is the initial preparatory work. Whether it’s a mortgage broker or a bank–based lender, you’ll need to provide them all pertinent documentation as early as possible so we can avoid unnecessary problems and delays. Remember, call HR and make sure they’re not going on vacation, pdf your documents, keep records of all fund transfers (such as selling investment funds); any funds transfer for down payments or all–cash deals early; don’t buy a new car or take on a new large line of credit, for example.


Step 3. Loan Submission!

Once all the necessary documentation including the appraisal is assembled, your loan processor will put the loan package together and submit it to the underwriter for approval.

The Preliminary Approval for Fannie/Freddie/FHA Loans

The formal loan application must be documented by the following forms:

  • The purchase contract and any relevant addenda
  • The Uniform Residential Loan Application (Form 1003 or Form 1003(S)) and, if applicable, a Statement of Assets and Liabilities (Form 1003A or Form 1003AS) 
The initial loan application must include sufficient information for the underwriter to reach an informed decision about whether to approve the mortgage loan
  • The final loan application signed by the borrower must include all income and debts disclosed or identified during the mortgage process
  • A complete, signed, and dated version of the original and final Form 1003 or Form 1003(S) must be included in the mortgage file

Step 2. Requesting Documentation

Within 24 hours of ratification of the Purchase Contract, the lender may request a lender’s credit report (if one hasn’t been pulled already), an appraisal on the property, verifications of employment, mortgage or landlord records, a preliminary title report, picture ID, W–2s (2 years), and any other necessary supporting documentation used in the underwriting process. Be responsive as these are the type of folks who wanted it 15 minutes ago.

Step 4. Loan Approval

Preliminary loan approval generally takes anywhere from 24 hours to 10 days, whereby a lender’s underwriter will scrutinize the application materials and, if necessary, issue conditions on the loan. Any loan conditions must be satisfied before the loan can close. Be flexible, diligent and responsive as we are at their whim.

Goal: Final loan approval is one thing but if you hear the magic phrase, “clear to close,” then you know that we are, well, clear to close!

Papers Please.

These are the documents you need ready (in pdf format): 

  • Last 2 years of W–2s &1040s; self–employed and/or tax returns (personal & business returns (e.g., 1120, Sched. K–1)(Ensure they are filed and certifiable)
  • Last month of pay stubs & employer verification Last 2 months bank statements (checking, savings, IRA, Money Market, etc)
  • Photo I.D. Rent history/checks/landlord info Gift Letter from relatives/investors; don’t forget they can ‘loan’ you money through forgivable loans
  • All cash? Funds verification/bank statement
  • Changing jobs? Offer letter from new employer + 1 pay stub from pay cycle
  • For current home owners: current mortgage statement/sales contract
  • For Anything Unusual: Explanatory information for any special cases or situations [/box]

IMPORTANT: During the Underwriting process you’re going to compete IRS Form 4506-T. What, praytell is that? It is your authorization for the underwriters to order and pull a transcript of your tax return for a given year or for the most recent numbers Monsieur Uncle Sam has for your tax number. Form 4506, on the other hand, is a request for a copy of your return (+$57 fee). Keep in mind that e-filing or even filing in person at the IRS (Golden Gate Avenue in Civic Center) will add around 4 to 6 weeks to when the IRS can verify your return. Why does this matter? For some underwriters a personally filed copy with a “FILED” stamp is enough, but for many other underwriters the transcript reporting is the only valid confirmation they accept of your current tax status. It becomes an issue if our escrow period overlaps with this 4 to 6 week period.

Take away point: File early.



A Lender’s Deciding Factors:

A lender’s decision factors are influenced from their initial eligibility review, which should have happened before underwriting begins during the pre-qualification phase of this all. Post-financial crisis standards require documentation showing a borrower’s ability to repay and underwriters must examine at least 8 underwriting factors in their decision including:

  • Credit history (the middle average to the three major scores)
  • Current and expected income or assets 
  • Employment status (and how you’re paid — salary vs. commissions/bonuses) 
  • Monthly debt to income ratio or residual income (from stocks/investments) 
  • Current debt obligations (student debt is a big one), alimony, and child support
  • Cost of mortgage-related obligations/expenses (like PMI, points, balloon payments, etc). 
  • Monthly payment amount and those of any other simultaneous loans (like a second or Kaiser program for physicians) 


  • A lot of ratios: loan–to–value/appraised value/combined loan–to–value
  • what the credit report says about you
  • amount of waivers and exceptions the loan rep may give you
  • loan type (duration), post-funding reserve amounts (what gets counted and not) 
  • purpose of property
  • occupancy plans
  • zoning and number of units (potential income) 


Step 5. The 72-Hour Cooling Off Period 


By this point you’re probably wondering how much money you have to send over to the title company. That depends on what amount is stated in the Closing Disclosure document. Within 1 to 5 days after the loan approval, the title company will issue the CD, which is a standardized form that came into use starting in late 2015. The document is supposed to describe and itemize the amounts, charges, costs and credits relating to the transaction. The amount due from you guys (i.e., the remainder of the down payment, advance premiums for insurance and related fees) will be indicated clearly. If there are any changes to the bottom line this will have the ability to derail an on-time closing as each time a Closing Disclosure is issued it must then be followed by a mandatory 3-day cooling off period. So if you see something wrong or if something looks awry say so immediately so we can fix it asap.

You MUST acknowledge receipt of the form as there is a mandatory 72 hour waiting period before the final loan documents (including the Note and Deed of Trust) can be completed.  If there are any changes in costs what the buyers will have to pay an entirely new CD must be generated and a new 72-hour period has to run before loan docs can be finalized. Don’t forget you still have to sign the docs too! Our Escrow Officer will either call you directly or have us make an appointment with you to sign all the the loan documents, which must be signed before a notary public in ink. Be sure you have to have your ID ready!

Step 6. The Signing

After the amounts are finalized, the title rep will reach out to you directly to coordinate the signing. The loan documents are made up of the loan note itself and the deed of trust (i.e., mortgage lien that will be recorded against your title deed). There’s a lot of jargon in these documents that are reply standard and routine. Namely they ask you have insurance in place along with spelling out your loan’s structure. In addition to the signing loan documents you’re going to be signing deed transfer documents, a formal loan application perhaps, permission for the lender to get your credit report and tax transcripts as well as other forms related to the transaction. The title person will go over how property taxes work (remember you’ll be underpaying for the initial time you own until the City’s records are updated in which case you’ll be asked to pay expected shortfall between the sellers’ purchase price and your purchase price). 

Step 7. Funding

Once all the loan documents are signed, they will be returned to the lender, who then reviews the loan package once more. If all the forms have been properly executed, the funds due to the seller will be transferred by wire to the title company who will then ‘cut’ the checks to everyone identified. Note: ALL fund releases must be by mutual consent of the buyer and seller. Title cannot act otherwise.

Step 8. Document Recording

When title receives the funds from your lender, your Escrow Officer will authorize recordation of the signed property transfer documents with the County Recorder. Mr. or Ms. Officer will then prepare a Final Settlement Statement and disburse the proceeds to the seller, pay off existing encumbrances and other obligations (i.e., their loans) and any fees like HOAs or pro–rated property taxes. And, you’ll have to wait until the next day in San Francisco, as we do not have same–day recording, so the transaction will be recorded the next business day typically unless there’s a holiday involved.

Step 9. And We’re …

Either the same day or the nex but when all the money is sent to where it needs to go we are then C-L-O-S-E-D! 

You know that this is just general information, right? Your specific case will be different and lenders must abide by fair lending practices and regulations. Also remember that housing mortgage markets have continued to adapt and become more robust as time goes on so be sure to do your research,

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