Friday, October 17, 2008

Loan Conditions

We get asked many questions about loan conditions. Here's a brief overview of the different types of conditions and a few examples of each:

-- Prior to docs conditions. These are things that must be reviewed by the underwriter before a final approval (clear-to-close) is issued. Examples: pay stubs, bank statements, loan application, credit report, appraisal.

-- At closing conditions. These conditions must be satisfied at the closing. The list of "at closing" conditions is usually included in the lender's closing instructions to title, however, underwriters occasionally forget to include some. It is the mortgage broker's job to know what the "at closing" conditions are so there won't be any problems after the closing. Examples: correct seller concessions, maximum allowable monthly payment, loan application must be signed again, flood cert.

-- Prior to purchase conditions. For loans that are not directly funded by the investor, these are the conditions that must be satisfied before the investor will buy the loan from the mortgage banker. Examples: telephone verification of employment, closing protection letter, state-specific disclosures.

-- Prior to funding conditions. These are things that have to be verified before the loan can fund. Some lenders will not allow a loan to be funded, even though it has closed, unless they see various documents. Examples: copy of the signed HUD, signed Deed of Trust, signed loan application, proof of the wire from a down payment assistance program.

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