Common sense is not always used in underwriting decisions. Guidelines have to be followed in order for mortgage lenders to sell your loan after you close to the major players on the secondary market who are Fannie Mae, Freddie Mac, FHA (insures the loan but doesn’t buy loans) and the large institutional investors. If you put 50% down, have a 750 mid score, and make plenty of dough, most of the time you’re a shoe in waiting just for an appraisal to come in for value. Sometimes though, the subject property may have physical issues that need to be cleaned up or title issues that need clearing up. My point is that no matter how great the borrower, many things along the way have to be managed in order to get to the closing table.

Below are a couple of consumer little-known underwriting tidbits that may help you get to the closing table faster and plan ahead to avoid loan processing issues.

Do you have judgments, collections, non-mortgage charge offs or medical debts? Knowing which derogatory accounts to pay or not to pay is important because each secondary market agency is a little different.

Judgements

• • FHA: Yes, the judgement must show as resolved or paid off prior to (or at) closing. Exception: A judgement is considered resolved if the borrower has made timely payments for at least three months of scheduled payments.
• • Conventional: Judgements must be paid prior to close with supporting documentation available.

Collections and Non-Mortgage Charge Offs

• • FHA: Yes, if the collections’ balance is greater than $2,000 the collections will need to be paid. Non-mortgage charge offs do not need to be paid.
• • Conventional: Based on property type

One unit: borrowers are not required to pay off outstanding collections or non-mortgage charge offs

Two to four unit: collections and non-mortgage charge offs totaling more than $5,000 must be paid in full prior to (or at) closing

N/O/O: collections and non-mortgage charge offs equal to or greater than $250 must be paid in full

Medical Debts

• • FHA: Not considered as debts
• • Conventional: Are considered as debts

Let’s Talk a Little About Appraisals

Conventional (Fannie, Freddie) DOES NOT require that the utilities be on at the time of inspection, if the utilities meet the local community standards, as noted by the appraiser.

The appraisal report MUST be completed in “as is” condition and NOT in “subject to” (meaning they have to be turned on) condition in order for it to be acceptable.

FHA REQUIRES that the appraiser tests ALL utilities to confirm that they are all functioning properly at the time of the inspection and noted on the appraisal report.

Now… go make a deal!

By Carl Edward Guzman, CPA

Carl Guzman, NMLS# 65291, CPA, is the founder and President of Greenback Capital Mortgage Corp. He is a residential financing expert and a deal maker with over 28 years’ experience. He currently has 168 5 star reviews on Zillow. Carl and his team will help you get the best mortgage financing for your situation and his advice will save you thousands! www.greenbackcapital.com [email protected]