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The Secondary Market: Underwriting Guidelines To Loan You Out Of Trouble

03__The_SecondaryYou may feel that the secondary market underwriting guidelines are easy to master, but it is noteworthy to mention that there are varied intricacies involved in the whole process and it is imperative that you get a hang of them just to ensure that the loan application formalities do not fall flat. After all, you have pinned a lot of hopes on clinching the loan.

Factors That Find Importance in Your Loan Application

These days there has been quite a surge in disposable incomes. But underwriters take stock of a whole lot of factors, apart from of course the income of the applicant, when they are considering loan applications. And it is always worthwhile to have a fair idea about these factors before you tender a loan application.

Quite obviously, the most important item of consideration is the monthly income of the applicant. But calculating the monthly income is not an easy task at all, for herein not only the borrower's income, but also that of all the co-borrowers will be taken into consideration.

Besides this, there are also other kinds of incomes that are taken into account by an underwriter. These are:
  • Salary: The underwriter will consider all the kinds of remuneration that you receive from the various income sources and this includes hourly, weekly and of course, the monthly payments that you receive. The only criterion that needs to be fulfilled is that you should have a two-year employment record.
  • Commission and Bonus: The underwriter also considers the commissions and bonuses that you receive and while he does this, he will average out your earnings from these sources for the last two years. For this information, the underwriter has at his disposal the federal income tax return statements, employer's verification or the pay slips of the employees.
  • Self-employment Income: For a complete appraisal of the loan application of a self-employed applicant, the underwriter relies on the individual's federal income tax return documents and also his annual profit and loss statements. The current earning trends in the particular business of the applicant also serve as guides for the underwriter.
  • Other Income: Earnings from rented properties, interest, dividends, social security remuneration and pension are some sources of income that the underwriter will definitely consider when going through your loan application.
Apart from your monthly income, your loan application carries various other financial details about you for the underwriter to take into account as he muses over your credit credibility. These include your personal debt obligations and your housing expenses.

A fat pay package is not enough to earn you a hefty loan. The underwriter will also consider your debt obligations before recommending you for a loan.

Besides, the underwriter also needs to ascertain the size of your housing expenditure. Housing expenditure may come in various garbs, like monthly property taxes, home insurance payments (which amounts to 1/12 of the yearly taxes and the insurance amount) and the monthly principal and interest payments on your mortgage. There are some other issues with the underwriter. Like he may wish to go through your condominium fees, homeowners fees, special assessments and the like before he consents your loan proposal. But you can be sure that the underwriter will object to loans that extend beyond 20 months.

Determining the credibility of the borrower is the prime concern of the underwriter. So he will go through the borrower's credit report statements and ensure that the applicant will be punctual with his repayments and not falter with them. In this context, there are some parameters that guide the underwriter, like:
  • Past and Current Mortgage Debt: Make sure that you flaunt an admirable mortgage payment record, for this alone, to a large extent, will determine your credit worthiness to the underwriter.
  • Collections, Repossession, Foreclosures and Bankruptcies: Though these public records come across as a slur on the credit history of an individual, do not fret. For underwriters are considerate enough and would definitely consider your case if you have a valid reason for your slump in credit worthiness.
  • Installment and Revolving Credit: These are ways and means for the underwriter to ascertain your attitude towards your debt obligations.
What the Underwriter Has To Say About Funds For Closing

If your aspired loan is to go in for financing a house, then you can be sure that the underwriter will ask you how are you going to pay for the down payment and the closing costs. And if you do not want to push away your underwriter, you should definitely consider the following sources for your resources and be rest assured that the underwriter won't find any cause for complaint:
  • Cash: Cash is acceptable when it is with any bank or investment company.
  • Stocks, bonds and mutual funds
  • Funds Raised from Sale of Existing Property
  • Gifts from Family Members: In this context, it is worth mentioning that some loan schemes limit the size of gift funds.

Get to know the ins and outs of underwriting so that your loan application procedure doesn't get stalled.----------------------------------------------------------------------------------
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