Getting Approved |
The underwriter will review and analyze the processed loan package and either approve, deny or suspend your application for a loan. If mortgage insurance is required for your loan, the underwriter will also submit the loan package to a mortgage insurance company such as Genworth for review.
In reaching a decision on your application, the underwriter will take into consideration your income, credit, cash reserves and the property itself.
Terms and concepts you should know:
- Housing expense ratio is the percentage of your gross monthly income it takes to make your house payment including taxes and insurance. If you earn $4,500 and your house expense is $1,500, you have a 33% housing ratio (1,500 is one third of 4,500).
- Total expense ratio is the percentage of your gross monthly income it takes to pay your house payment plus other monthly payments you make, like car payments, credit cards, student loans, etc.
- Cash reserves is the money you have left in the bank after the loan closes. Cash in the bank is a very important factor -- you have to have some after the loan closes just in case you run into unforeseen circumstances. The usual requirement is at least two months worth of house payments.
- Credit history is the timeliness with which you've paid your bills in the past. Most important is the last two years.
- Loan-to-value (LTV) is one of the most often-used jargon terms. If you have a house valued at $100,000 with a $90,000 loan you have a 90% loan-to-value ($90,000 divided by $100,000 = 90%).
The underwriting process usually takes less than two days to complete. Oftentimes, buyers want to be approved before they find a property to buy.