I hear this statement a lot!…”Why is the underwriter asking for that?!” Lately my response has been…”Because mortgage underwriters don’t use common sense any more”. I know I know, it’s a terrible explanation but it’s a lot better than what I use to say as a newbie loan officer…”Because it’s their money and we have to play by their rules!”
I also find that it is helpful for people to explain the rationale behind an underwriter’s request, which is what I hope to do with the following list. If you don’t find the explanation that you are looking for, please feel free to make a comment below.
Your Mortgage Underwriter Has Asked You For…
Credit inquiry letter of explanation: If you have any credit inquiries that appear on your credit report within the last 90 days than the underwriter just wants you to write a letter explaining that none of the inquiries resulted in additional debts that do not already appear on your credit report. If one of the inquiries did result in a debt (e.g. You financed a new car) than you will need to tell your loan officer and provide a statement showing what the monthly payments are. Usually I have found that the credit inquiries are the result of shopping around for a mortgage
Tip: Keep your letters of explanation simple and to the point.
A 3rd pay stub when your loan officer only asked for 2: Technically to get a Conventional, FHA, or Rural Housing loan, you are suppose to provide pay stubs that cover 30 days. If you are paid bi-weekly (26 pay periods in 1 year) than your 2 pay stubs only cover 28 days. Some underwriters will want a 3rd pay stub to satisfy the 30 day rule. It’s totally ludicrous (I know!) but everything in the mortgage world is “letter of the law” these days.
Tip: Save yourself an extra trip and give your loan officer the most recent 3 consecutive pay stubs at the start.
A copy of your divorce decree: “Well this is just going too far! That is none of the underwriter’s damn business!” (actual quote from disgruntled client) Unfortunately it is the underwriter’s business because they need to see what debts you might be responsible for, how much alimony and/or child support you might be responsible for, as well as whether the decree spells out if any equity in the home is suppose to be divided. When you get a mortgage you sort of have to undress financially. OK you have to strip naked financially! It stinks I know!
Tip: Save yourself (or your loan officer!)a trip to the county courthouse and keep a copy of this document in a handy location.
Copy of “canceled earnest money check”: The first time I heard this I was like, “I’m pretty sure they didn’t cancel that check”. So don’t worry you aren’t an idiot for not knowing what this means. The canceled check is just the copy of both sides of the check proving that it was deposited by the title company or real estate company. Your bank can provide this to you if you can’t get access to it with your online banking.
Tip: If you pay your earnest money deposit with a cashiers check you only have to provide the underwriter with the carbon copy or receipt.
Mortgage statement from former primary residence: If you are trying to close on a new home before selling your previous home (or to keep as a rental) than the underwriter just wants to know if your property taxes and home owners insurance are included in the mortgage payment. Your credit report won’t have that information. If the mortgage statement shows that they are not included, than you will need to provide a statement of your property taxes and home owners insurance so that the underwriter can include those payments in your debt-to-income ratio.
Tip: Any competent title company should provide you with a property tax statement for free.
A copy of a $500 check that my mom gave me: This type of condition is super annoying because it just seems so ridiculous. Basically the underwriter is required to document any large deposit into your checking or savings accounts that isn’t a pay roll deposit. They want to confirm that you haven’t borrowed any money for your down payment.
Tip: It’s impossible to document cash so do NOT make any cash deposits into your accounts within 2 months of trying to get a mortgage. 2 months is how long mortgage underwriters require before the money is considered “seasoned” and you won’t have to document it.
I know that underwriters can ask for seemingly ridiculous items at times and I sincerely feel your pain. At the same time try not to complain too much and remember that you are borrowing a significant amount of money.
What ridiculous items has an underwriter asked you for? Make a comment below and I’ll do my best to explain why.