Documents for Underwriting Process

Documents Needed for Underwriting

• HOA Dues: Required for condos, whether attached or detached. Obtain payment amount and frequency from the member.
• Mortgage Statement: Verify mortgage balance and escrow for property taxes and insurance. If taxes and insurance are not escrowed, add these costs to liabilities.
• Property Tax Statements: Required for both summer and winter tax bills for the subject property and any vacation homes. Add to liabilities if not included in the mortgage payment.
• Homeowner's Insurance: Check if dwelling coverage is sufficient to cover the first mortgage and HELOC. May request an increase if coverage is insufficient. For condos, require a copy of building insurance (covers the building to the walls) to supplement homeowner's policy.
• Flood Insurance Policy (if applicable): Required if the property is in a flood zone.
• Deed/Quit Claim Deed: Verify names on the property and vesting. If a trust is involved, request the Existence of Trust document.
• Divorce Decree: Required by the title company if a divorce occurred during property record searches. Ensure the ex-spouse is not owed any money from the home.
• Trust Existence: Provides the mortgage document vesting information, Liber and page of the recording, and lists the provisions of the Trust, including names of the Successor Trustees.
• Origination Fee: Collected upfront and refunded if the loan is denied within three business days.

Checking the Application

• Review the Application Completely: Ensure all fields are complete.
  • Vesting on Page 1: Required for title order and mortgage document accuracy.
  • Escrow Question on Page 2: If members do not escrow for tax/ins, summer and winter tax bills are required.
  • Estimated Home Value and Mortgage Balance on Page 2: HELOCs are financed up to 80% of home value. Insufficient value may prevent granting the minimum HELOC amount ($5000).
  • Demographic: Must be completed, even if members decline. An MSR must complete it, even if it's a guess. Required for both approved and denied loans.
• Disclosure of Affiliated Business Agreement: Required by RESPA at the time of referral to the title company.
• Borrower Authorization: Members must sign and date this form. Used for homeowners insurance policy additions and employment verifications.

Documents needed for Underwriting (cont.)

• Income:
  • Two Consecutive Pay Stubs: Required if employed.
  • Two Years of Personal Tax Returns: Required for self-employed individuals, including all schedules and K-1 forms.
  • Clear and Legible Copies: Ensure all documents are easily readable.

Scanning Documents

• Review Attachments before Emailing: Verify all documents scanned clearly and are not cutting off any important information.
• Organize Documents: Group multi-page documents together in order.

Looking for Approval

• Four Main Factors:
  • Credit History: Review repayment history and patterns.
  • Debt-to-Income Ratio: Must be under 55%. Unsecured debt ratio is also considered.
  • Loan-to-Value Ratio: Loan to value is reviewed.
  • Job Time: Job tenure is considered.
• Other Compensating Factors: While these are not the main factors, they play a part in the approval process.
• Income Calculation: Calculate hourly or salary amount and an average of commission amounts. Obtain the previous year's W2 form and the year-to-date total for the current year to calculate an average.
• Debts: Look closely at the amount and timing of debts, especially revolving/unsecured credit. Escalating credit obtained over a short time period is a concern unless it's caused by a specific life event (illness, death, job loss). Verify the mortgage date matches the lien on title. If it doesn't, there may have been a mortgage since the initial one.
• 6-Month and 12-Month Waiting Periods:
  • 6-month waiting period: Required after the purchase or refinance of the primary residence.
  • 12-month waiting period: Required for vacation homes.
  • Inform members about these waiting periods to avoid unnecessary credit pulls.
• Liabilities:
  • Add property tax and insurance for any homes owned if these are not escrowed with the mortgage payment.
  • Include HOA fees, as they are rarely included in escrows unless they were seriously delinquent.

Loan Documents Required for Closing

• Two most recent pay stubs
• Two most recent years of tax returns
• Business owners need to include all tax return schedules
• Insurance declarations page or binder
• Proof of comprehensive and collision insurance deductibles under $1000
• Vehicle information should be listed on the insurance policy, including VIN, year, make, and model
• Driver must be listed on the insurance policy
• Include Alliance Catholic Credit Union insurance lien information
• Original title
• “Green” Title for cars, “Blue” Title for boats
• Release of prior lien, if applicable
• Payoff details from the current lien holder, including:
  • Financial Institution Name
  • Account number
  • 10-day payoff amount
  • Mailing address to send the payoff
• Final purchase amount
• Salesperson name and contact information
• Ensure the Purchase Agreement includes Alliance Catholic Credit Union lien information

This quiz covers the essential documents required for the underwriting process, including HOA dues, mortgage statements, property tax statements, and insurance policies. Understanding these requirements is crucial for ensuring a smooth transaction and protecting both borrower and lender interests.