When your loan is submitted for underwriting, it goes directly into the hands of an underwriter whose job is to determine your “creditworthiness” or your ability to repay the loan. An underwriter takes into consideration the following aspects when deciding whether or not to approve your loan:
Your work history
A stable history of employment in the same line of work is considered ideal. Job-hopping is not. However, if you have switched jobs within the same line of work for advancement in your field, it should not be a problem. If you are self-employed, work on commission, or have a small business, expect the underwriter to have questions.
In looking at your ability to repay the loan, your job stability and gross income (in relation to your expenses) are critical. Most income must be verified as having been received for at least two years to be used for qualifying purposes.
Your credit history
Via your credit report, the underwriter looks at your past payment history. A consistent pattern of late payments, collections, etc., obviously is not looked upon favorably – and you will be asked to explain about your bad credit conditions. Bankruptcies generally must be discharged for at least two years, the reason explained, and you generally must reestablish credit to be considered.
The underwriter wants to see your net worth, determined as: the money you have available for a down payment, closing costs, cash reserves (money left over after closing of escrow to cover 2-3 months mortgage payments) and other liquid assets. The underwriter also will want to see the “source of funds” – where the money for the down payment and closing costs is coming from. Don’t move money around (pay off bills, receive a gift, etc.) without first consulting your loan officer about the best way to do it, since it may affect the underwriter’s view of your loan.
The underwriter will be concerned with the amount of debt you have because it affects your qualification and ability to repay the loan. Excessive use of credit may not be looked upon favorably.
Because the property is the lender’s collateral for the loan, the value, marketability and condition of the property are extremely important. The underwriter looks at the appraisal for this information, and generally verifies that the appraisal and the purchase price are in the same ballpark.
In the Tahoe area, there may be special features about a property that not all lenders will loan against. For example a pier and post foundation, a condo that is in an HOA that has on-going litigation, or a condo-hotel. Special properties may require a special lender. Asking your lender upfront if these types of properties are ones they loan on will save you a lot of time when getting your loan. If they don’t you’ll now upfront you need to speak to other lenders who do loan on those types of properties.