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What Exactly Does An Underwriter Do With Your Mortgage? - YouTube
Channel: Win The House You Love
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Hey, Kyle here with
winthehouseyoulove.com.
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Today were talking about what does an
underwriter do exactly for your loan?
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So you're going to learn three things.
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Number one, why underwriting
determines the fate of your loan.
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Number two, how to make underwriting
easier and number three, how long it
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takes and the things that you can do
to speed up the underwriting process
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so you can get in your home quicker.
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This is all about.
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Making the home buying process, less
stressful and helping you go through
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it as quickly as possible because
getting a loan isn't super fun.
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We want it to be a joyful
process to buy a house.
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So we're going to talk about how
you can ease this process up.
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So first let's talk
about a quick overview.
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All right.
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So let's look up here really quickly.
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Think of it like a three stage
process for underwriting.
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So underwriting, a basic definition
of what underwriting is, is the lender
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needs to verify your information, to
make sure that you can pay back a loan.
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All right.
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They need to make sure that if
they're going to lend you $200,000,
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that you have a high probability
of paying back that $200,000, they
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don't want to lose that money.
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So there's, kind of a
three-step underwriting process.
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Number one, you have a computer approval.
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So most loans are underwritten
with computer software.
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So the computer is first going to issue
an approval based on the data that
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you put in, in your loan application.
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Then in step two the underwriter is
then going to verify the information
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that was put into the computer program.
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Now, this has done in two stages that
we'll talk about here, about three
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fourths through this video, and then
number three, your loan is approved.
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So the computer verified your
information, then an actual person,
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actual human reviews your information,
and then your loan is finally approved.
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So let's talk about AUS.
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AUS stands for Automated
Underwriting Software.
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And this is a software that's going to
take all the information from your loan
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application, and it's going to compare it
to hundreds if not thousands of mortgage
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guidelines, mortgage guidelines are just
filled with tons of different rules on
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what qualifies you for a mortgage and
certain limitations and documentation
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that you need for specific scenarios.
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It can be really obnoxious, like some
mortgage guidelines are 1,500+ pages.
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So, what AUS is doing is it's taking the
information from your loan application
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and it is now comparing it to guidelines.
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All right.
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And then what it's going to do
is it's going to give you an
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approval or denial recommendation.
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So the software, the guideline
software, is now going to compare the
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information that you put in on your
loan application and say, hey, we
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think this fits all of the guidelines.
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So after the underwriting software
says, hey, this fits the guidelines,
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then an actual human has to review
that information because here's what
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happens is on your loan application.
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You might put in that you
make $50,000 per year.
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That's great.
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But the computer can't tell if you
actually make $50,000 per year or not,
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the underwriter has to actually look at
your pay stubs, W2's, maybe tax returns
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to see, do you actually make $50,000?
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And if so, they will green light basically
what that underwriting software is saying
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so you can get a final loan approval.
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So the underwriter is going to check
over your income, your employment
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history, credit, and debt to income
ratio the appraisal, the money that
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you have for your down payment and
then title, insurance, I have appraisal
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in here as well, but they're going
to check the property to make sure
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that it meets lending guidelines.
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So you can see you have this
kind of two phase approach of
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looking at these guidelines.
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So you have these big organizations
are these big entities that
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are setting up these rules.
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So you have people like Fannie
Mae, Freddie Mac, FHA, VA, USDA,
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they're setting the guidelines.
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They're setting up thousands of pages
of what qualifies you for mortgage.
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You're putting in your loan application
and a software is comparing your
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application to all of these rules.
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And then if you get an approval
through the software, an underwriter,
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an actual human is going to double
check everything and make sure that it
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actually is a loan that can be approved.
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Now not all loans are run through AUS.
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Some are done through a process
called a manual underwrite.
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And in a manual underwrite, this is where
the underwriting software either says,
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hey, we can't really get a good idea of
the risk of this loan or flat out, we
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just won't do an automatic underwrite.
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And there are certain guidelines that,
you know, Freddie Mac and Fannie Mae and
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FHA, USDA and VA have for being able to
give an automated approval and I'll make
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a future video about manual underwrites.
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They're a little bit more document heavy.
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They can also have a higher interest rate
to them, but the benefit is you don't need
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a credit score to get a manual underwrite.
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Okay.
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Something that's huge here is that an
underwriter is the only person who's
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going to approve or deny your loan.
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A loan officer will not ever
approve or deny your loan.
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They do not have the authority
and capacity to approve your loan.
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So if you ever feel like you need to talk
about a financial scenario with your loan
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officer know that your loan officer is on
your side, they don't get paid most of the
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time, unless they help you close a loan.
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They are your advocate to the underwriter.
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Okay.
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So kind of think of
them as your go-between.
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So you have the underwriter,
then you have your loan officer
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and then you have you, okay.
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There should be this communication
channel where you and your loan officer
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are talking, and then the underwriter
and your loan officer talking, you'll
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never be able to talk to the underwriter.
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In most circumstances, you're
gonna have to talk the loan officer
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and the loan officer is going to
be advocate to the underwriter.
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Now, just a quick side here.
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Iif you go to winthehouseyoulove.com/free.
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I have a PDF that has seven different
ways that you can save money on home.
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And they're like actual strategies
that I use with my clients to help them
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save money on their mortgage and their
overall property investment as well.
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Okay.
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So normally you're going to have two
rounds of underwriting and they're
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not really called rounds, but we'll
kind of think of them this way.
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The first one that you have is
you have your initial approval.
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So in the initial approval, This is
where you're under contract for a
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home, or you start a refinance and
you take your loan application and
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you submit it to your loan officer.
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And then your loan officer probably is and
ask for some documents, the loan officer's
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going to submit your loan application
and documents to the underwriter.
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And the underwriter is
going to review everything.
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And then they're going to come
back with a conditions list.
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Okay.
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So we're going to refer
to this as conditions.
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So the underwriter basically
says, hey, we'll approve the loan.
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As long as you meet the
following conditions.
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And it's usually a list of it
can be anywhere from two things.
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It can be up to 20 things.
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I mean, it could be higher than that.
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Depends on how much was
submitted in the beginning.
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Then you're officer's going to
ask you for those conditions and
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then ideally everything would
be cleared in that second round.
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And then you may have another round
of underwriting depending on what
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information was or wasn't given in here.
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Okay.
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So that those conditions are
that second round of review.
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All right.
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So you put in the documents and
information to the underwriter,
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they gave you an initial approval,
then you re-sent in new conditions,
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and then hopefully they should give
you this final approval at the end.
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And I know that my handwriting is awful.
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So a tip here really quickly is when a
loan officer asks you for information
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or when a processor is asking you
for documents, send in everything
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that you can as quickly as you can.
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Alright.
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Sometimes what happens is I'll
ask clients for documents at the
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very beginning and they'll take a
week or two to send me documents.
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And what they don't realize is every day
that they send a document earlier to me
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is a potential day that we close earlier,
or think of it this way every day that
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you wait to send an in a document, could
push your closing back one day further.
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Okay.
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So you want to submit every single
thing that you have, because if a
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lender is asking you for documents or
for information, most likely they're
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waiting on you, there's nothing else
that they can really do behind the
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scenes without that information.
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So send everything you can send it
quickly and also send it cleanly.
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What happens a lot of times is I'll ask
for documents from people and they'll just
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go take loose pictures of documents and
then text them to me or send me 20 emails.
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I can't look through all these and,
you know, effectively organize them.
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Cause sometimes that will take me
up to an hour if they're sending
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me this huge document package.
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It is really not that hard to open up a
scanner app on your phone or download one.
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Put them all in PDFs,
organize them, label them.
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This is my 2018 tax returns.
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This is my 2019 W2's.
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This is my past 30 days of paystubs.
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It's not difficult to do that.
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It's going to help your loan get processed
a lot easier and prevent somebody from
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having to re-ask you for documents
because it's not easy on the lender side
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or the loan officer side, when people
are sending 20 plus emails to them times
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however many buyers they're working with.
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Okay.
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So keep that in mind.
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That's gonna help your loan be a lot less
stressful and go through a lot easier.
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Also, don't open any credit lines
and don't make any big non-payroll
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deposits in your bank account.
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Okay.
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So you don't want to go open a
credit line, you know, don't go buy
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furniture, don't get a car because
those are going to change your debt
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to income ratio and your credit score.
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Also, you don't want to deposit a bunch
of money into your bank account that
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can't be verified because what's going
to end up happening is the lender won't
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be able to use those funds if they can't
verify the source and where it came from.
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So again, this is where you can
talk to your loan officer if you
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need to do any of these things.
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If you need to open credit or you
need to make a deposit in your
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bank account, your loan officer is
your advocate the underwriter, they
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know what to look for and can help
you come up with a plan before you
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actually do any of these things.
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So.
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Let's go ahead and have a CalmMoment
because the goal here is for you to have a
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calm plan and a soft focus moving forward.
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So the underwriting process can be one of
the most stressful parts about getting a
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mortgage, because this really is where the
fate of the loan kind of comes into play.
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And the underwriting process can
be pretty long you know, most
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homes take about 30 days to close.
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And the majority of that time is
spent in underwriting because they're
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trying to collect a lot of documents,
so it can be really stressful.
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So just know if you're feeling
stressed, it's perfectly fine to
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talk with your loan officer and ask
for their expectations about things.
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Hey, you know, this is taking
a certain amount of time.
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Is this normal?
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Hey, is there anything
else that you need from me?
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You don't have to keep checking
in and saying, is everything okay?
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But hey, is there anything that I can
do to make the loan easier for you?
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It's perfectly fine to ask those things
and to let your loan officer know,
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hey, I'm kind of feeling stressed about
this could you give me an update or
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could you clarify these things again?
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They work for you.
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They are the advocate between
you and the underwriter.
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Their goal is to help you get that loan.
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They're not there to
try to squash the loan.
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Okay.
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Something else to look at to make
things easier is looking at possibly a
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shared folder with your loan officer.
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Okay.
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So make sure number one, that this
is secure, so it's protected by a
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password or something like that.
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But, look into using it online shared
folder to be able to upload documents
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to your lender instead of over email.
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And this is if your lender doesn't have
a place to upload documents, you know,
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for instance, we use a document portal.
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So people can upload documents securely
in their accounts, but some lenders, don't
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have that and they just request things
over email, which is not very secure
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and it's difficult to keep track of.
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So having a shared folder, one place
where all of your documents are,
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makes it really easy to be able to
see what the loan officer has access
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to, and then you can always refresh
that and the lenders always can have
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that link ready when they need it.
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Also, this is kind of a joke, but you
don't need to send a blood sample.
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I know underwriting can be stressful
and it's going to feel like they're
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asking for so much information.
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I had a lady once who did ask
me, she was like, do you need
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me to send a blood sample too?
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Because it can feel like a
lender is asking for a lot and
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I get that it's frustrating.
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It's part of the process
nobody's picking on you.
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You know, you're not different
than all the other people who are
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getting asked the same things.
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And if you want to, you're welcome to
go look at the 1,400 pages of guidelines
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that show you why documents are being
asked for from these government entities.
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It can feel like a lot.
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But ultimately the lenders are only
asking for things because they are
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legally required to ask for those things.
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They're not trying to pick on you, even
though it can feel like that sometimes.
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So the best thing to do is try to
bear through it, send in as much
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as you can, again, send it cleanly
incident as quickly as possible.
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That's gonna help your loan
get processed a lot quicker.
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And then finally ask your lender about
turn times, and this is going to help
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manage your expectations of how long the
underwriting process is going to take.
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So it turns items are how long
it takes an underwriter to review
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your initial approval and the
conditions that you submit in.
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So for instance from the time that
your initial documents are submitted
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to the underwriter, it might take two
days to hear back from the underwriter.
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Okay.
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So underwriters with each lender
normally have their posted turn
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times, so they can give an expectation
for how long it's going to take
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your loan to be underwritten.
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Same thing with reviewing conditions.
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They'll let you know how long it's
gonna take to review those conditions.
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Now, most of the time the lender isn't
going to make that public to the buyers.
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But if you ask your loan officer and
just say, hey, how long do you think
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this is going to be in underwriting for.
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Then you can get a better idea of,
okay, if it's going to take three
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days, then I'm not going to bug my
loan officer every single day until,
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you know, to get an update on what's
happening with the underwriting process.
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Okay.
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So piecing this altogether, if you want
to go through the step by step plan
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to buy a home, this video over here
is going to help you understand how
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the underwriting process integrates
with everything else in this video.
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Take care.
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