What happens after underwriting?
Achieving final approval from the mortgage underwriter is a big deal  but its not quite time to celebrate. Youll go through a few more steps before you get the keys to your new place. The lender has to double-check your income and employment. And you still have to sign final documents and pay closing costs. Learn exactly what needs to happen after final approval to put your home sale over the finish line. In this article (Skip to)  Final steps in the mortgage process  Once your mortgage underwriter has signed off on the loan, there are just a few more hurdles to clear:  Your lender will conduct a final review, double-checking to make sure your documents are correct The lender will probably do a quality control check, pulling your credit report and verifying your employment one last time Youll get your closing documents at least three business days before closing to review before signing Youll bring in your cash to close and sign your final documents  Some lenders will fund your home loan almost immediately (table funding), while others may take a day or two to review the signed package first. Find out in advance how your lender does things to avoid unwelcome surprises. Final approval vs. conditional approval  Most borrowers get a conditional approval before the final approval, so dont be surprised if your mortgage underwriter has some questions about your financial situation. Mortgage underwriters are people employed by the lender to review and analyze your ability to repay the loan. The underwriting process will check your bank statements, credit history, and pay stubs for verification of employment. Self-employed borrowers may need to submit transcripts from their tax returns. If anything looks amiss in these documents or raises questions for the lender, you may receive a conditional approval with a few extra steps before closing. As part of your conditional approval, the underwriter will issue a list of requirements. These requirements are called conditions or prior-to-document conditions.  From conditional approval to clear to close  To meet these conditions, you may need to submit additional documentation, such as:  Additional bank statements or pay stubs  The lender may need this additional information to get a fuller picture of your financial situation   The lender may need this additional information to get a fuller picture of your financial situation Gift letters  If a close friend or family member gave you money to pay for closing costs or your down payment, you need a letter from the donor   If a close friend or family member gave you money to pay for closing costs or your down payment, you need a Verification of insurance  If youre using a conventional loan with less than 20% down, your lender will require private mortgage insurance. (USDA and FHA loans come with built-in mortgage insurance; VA loans dont require it)   If youre using a conventional loan with less than 20% down, your lender will require private mortgage insurance. (USDA and FHA loans come with built-in mortgage insurance; VA loans dont require it) Explanations  Your lender may want you to explain late payments or large transactions that appear in your bank statements. If theyre anomalous, they shouldnt affect your eligibility  Theres no need to take these requests for additional information personally. Conditional approvals are a common part of the mortgage process. Your loan officer will submit all your conditions back to the underwriter, who should then issue a clear to close, which means youre ready to sign loan documents. This last verification is your final approval. Getting your loan from conditional approval to final approval could take about two weeks, but theres no guarantee about this timeframe. You can help speed up the process by responding to your underwriters questions right away. Submit the additional documents the same day of the request, if possible. By providing documents and answering questions, youre doing your part to keep your loan on track. Final approval is not quite the end of the mortgage process, though. You still need to sign documents and go through a post-signing mortgage approval process. Read on. After you receive final mortgage approval, youll attend the loan closing (signing). Youll need to bring a cashiers or certified check for your cash-to-close or arrange in advance for a wire transfer. As your closing day approaches, you must avoid changing anything in your mortgage application that could cause the lender to revoke your final approval. For instance, buying a car might push you over the debt-to-income ratio (DTI) limit. Or, opening a new credit card account or applying for a personal loan could affect your credit score. Do not open credit accounts or finance big purchases prior to closing. This could affect your loan approval. If this happens, your home loan application could be denied, even after signing documents. In this way, a final loan approval isnt exactly final. It could still be revoked. This really happens to homebuyers. So protect yourself. Once you apply for a mortgage, enter a quiet period. Buy only the basics until your loan is funded. Add nothing to your credit balances, and do not sign up for any new accounts. This is good advice whether youre a first-time homebuyer, a refinancing homeowner, or an investor buying a rental property. Document review: LE vs CD  You may remember that when you applied for a mortgage, the lender provided a Loan Estimate (LE) form which outlined your mortgage terms and provided an estimate of your costs. Now, at least three business days before your closing day, you will receive a Closing Disclosure (CD) form. Loan Estimate form: This document shows an estimate of your loan terms and loan costs which can vary based on type of loan, mortgage rate, and loan amount  This document shows an estimate of your loan terms and loan costs which can vary based on type of loan, mortgage rate, and loan amount Closing Disclosure form: This document shows what youre actually scheduled to pay, both on your closing day and for your monthly payments  There shouldnt be a huge difference between your LE and CD, but its up to you to compare the documents to make sure. Federal law requires that mortgage lenders provide a Closing Disclosure at least three business days before your closing date. When you get your CD form, you need to compare it against the Loan Estimate you received when you made your mortgage application. Some charges on your Loan Estimate, such as the loan origination fee and appraisal fee, should never change on your Closing Disclosure. If these fees have changed, contact your loan officer and ask for a cost correction. Even a 0.25% increase in your loan origination fee can have a huge impact on closing costs, since this fee is based on your loan amount. Costs that can change from LE to CD  Lender fees shouldnt increase between your LE and CD, but other costs listed on your CD can increase. Some can increase by up to 10% while others can increase by any amount. Can increase by up to 10% : These include survey fees, title search fees, and pest control fees. Since these services are provided by third parties, the costs arent controlled directly by the lender  : These include survey fees, title search fees, and pest control fees. Since these services are provided by third parties, the costs arent controlled directly by the lender Can increase by any amount: Some costs depend on the final details of your loan, so they could increase significantly between your LE and CD. Your homeowners insurance provider, for example, may require an upfront payment. Or you may need to pay property taxes in advance. Delays in your closing day could increase some costs, too  Be sure to ask your loan officer or closing attorney about any cost increases you see on your CD. The interest rate on your pre-approval or Loan Estimate should resemble the rate on your Closing Disclosure, especially if you locked in your rate early in the loan process. In fact, its illegal for lenders to underestimate rates and fees on a Loan Estimate only to surprise you with higher costs on the Closing Disclosure, according to the Consumer Financial Protection Bureau. Even so, your interest rate could still go up if:  Your financial situation changes : A credit score drop or a loss in income could prompt the lender to increase your rate or rescind your eligibility  : A credit score drop or a loss in income could prompt the lender to increase your rate or rescind your eligibility Your rate lock expires : Delays in closing could mean you have to lock in a new rate, although rate lock extensions can often prevent this  : Delays in closing could mean you have to lock in a new rate, although rate lock extensions can often prevent this You change loan programs : If you decided to get a conventional loan instead of an FHA loan, for example, youd likely see different rates  : If you decided to get a conventional loan instead of an FHA loan, for example, youd likely see different rates The homes appraisal came in low : A low appraisal changes your loan-to-value ratio (LTV), which could affect mortgage rates or eligibility  : A low appraisal changes your loan-to-value ratio (LTV), which could affect mortgage rates or eligibility Your lender couldnt verify everything : If underwriters cant verify your side-hustle income or your overtime, your debt-to-income ratio could go up. This could cause an increase in your rate  : If underwriters cant verify your side-hustle income or your overtime, your debt-to-income ratio could go up. This could cause an increase in your rate You changed details of the loan: If youve decided on a 30-year term instead of a 15-year term  or if youve decided to put less money down  your rate would go up  Before you lock in a mortgage rate, get a realistic estimate from your lender about how long it will take to close the loan. Choosing a sufficient rate lock period is one of the best ways to protect yourself from surprise rate increases on your new loan. Dry versus wet settlements  When everything checks out on your Closing Disclosure, youre ready for closing day. There is one final task, and its what the entire home buying process has been leading up to: The lender must fund the transaction by providing the cash to pay for your new home. You might have a wet settlement, where the lenders money is disbursed at closing. This is also called table funding.  Some lenders prefer a dry settlement, which means the money is paid a few days after closing. Ask the closing agent or your mortgage broker how lender funding will be handled. A payment delay may make sellers cranky  if not worse. As the buyer, you will almost always have to bring money to closing to cover your down payment and closing costs. Its OK to use a cashiers check, certified check, or to wire the money. You cannot bring cash to most title offices. Be sure to check with the closing agent if you wire money. Confirm that the wiring instructions are correct, especially the recipient account number. Loan funding: The final final approval  Your mortgage process is fully complete only when the lender funds the loan. This means the lender has reviewed your signed documents, re-pulled your credit, and made sure nothing changed since the underwriters last review of your loan file. When the loan funds, you can get the keys and enjoy your new home. Verify your new rate (Jun 24th, 2021)