You’ve gathered every piece of paper you can find: your pay stubs, tax returns, and your second cousin’s birth certificate. And still, you’re getting calls from your mortgage lender asking for just one more piece of information.
Who is this underwriter he keeps talking about and why doesn’t she want you to buy a house? Will she rest before you’ve turned over your very soul?
Who Gives You a Mortgage?
You probably only meet with one person in relation to your mortgage. Or, if your lender has an online application process, you may never see a warm body until closing.
But an entire team of people works to get you a mortgage. Maybe if you meet some of the players, the process will make more sense. And be less scary.
In many markets, a home buyer meets with a mortgage broker.
A mortgage broker has relationships with several lenders. When you meet with him for a preapproval, he’ll pull your credit and collect some basic documents (bank statements, tax returns, pay stubs etc.).
He then compares your financial stats with the standards of the lenders he works with. Or he’ll send some basic information out to his contacts and ask who has a mortgage to offer you.
If you appear to fit the standards of one or more of the lenders, the broker will tell you the terms of the mortgages—interest rate, length, special conditions so you can choose the one that’s best for you.
When you make an application, the mortgage broker will forward your complete information to the lender so they can process it.
In some areas, home buyers meet directly with someone who works for a bank or credit union. There is no mortgage broker.
A mortgage originator might also be known as a loan officer or mortgage officer. Just like the mortgage broker, they will also pull your credit and start collecting documents from you.
But the mortgage originator knows what types of mortgage his bank or credit union offers and can usually tell you quickly if you’re likely to qualify for one of their mortgages.
When you fill out a mortgage application, the originator will forward your information to the company’s processor.
The mortgage processor is very low on the chain of command. Which means she is extremely important. If you talk to a mortgage processor, treat her nice. She has to deal with lots of yucky paper and files just so you can buy the house you want.
The processor goes over the paperwork to make sure it’s complete. Are there bank statements going back three months for all accounts? Is there a gift letter for money your parents are giving you for down payment? Are your tax returns signed?
If the mortgage processors sees anything missing from her checklist, she may call you (or ask the mortgage originator to call you) to provide more papers.
Mortgage processors are usually very organized people. They have to be. Or they get yelled at by their underwriters.
The mortgage underwriter makes the final decision about whether your income, credit, and assets are good enough to qualify for a particular loan.
They know more about the rules for every mortgage a lender offers than anyone.
And who makes these rules? Well lots of loans are sold to investors on the secondary market. And those investors make the rules about the kinds of loans they’re willing to buy.
Anyway, if a mortgage lender keeps your mortgage or sells it to someone else, there are standards for each loan that you have to fit if you want a loan approval. And if there is a rule that can be interpreted different ways, the underwriter makes the interpretation.
But first, she might ask you for more information so she can make a decision.
Blame the Underwriter
Whenever anyone asks you for more paperwork, they always blame the underwriter.
And if you get frustrated by having to provide more and more information to attach to your application, you can blame her too. Go ahead and curse her in your car.
But not too much.
Because the underwriter is supposed to approve mortgages that won’t lose the lender money (like if they had to foreclose). So a loan that is good for the bank is also good for you.
So if you get a mortgage that you feel comfortable paying every month, you might want to kiss your underwriter. I promise you. She won’t try to steal your soul.
Your Turn: Have you interacted with any of these mortgage professionals? Did they explain to you why they needed the paperwork they needed?