An underwriter is a person hired by a Lender to make sure the loan meets the guidelines of the investor or lender.  They really have a tough job because a lot rides on them and they are responsible for bad loans that get approved.  VA underwriters will take a file and look over it very carefully and make sure that the originating loan officer packaged the file correctly and make sure nothing is missing or fraudulent.  Underwriters must understand VA loan qualifications and mortgage approval based on the Veterans credit history, income, debt, down payment, equity and compensating factors.  They issue approvals, clear to closes and denials.  They are basically the last line in the home buying or refinancing process.  If a Veteran can make it past an underwriter then its usually clear sailing until closing.

VA GUIDELINES

 Once the loan officer has established the value of the home, obtained title work, income documentation and VA loan disclosures, the file is now ready for Underwriting.  The loan gets sent to the Underwriting and they will review everything the LO put together.  They have most of the analytical tasks.  They will follow all the guidelines established by the VA for approval.  They looks most at the 3 C's.  Credit, Capacity and Collateral.  Credit is obviously the documentation used to determine the Veterans ability to make payments on time.  Capacity is the Veterans income, debt, reserves and job time.  Does the Veteran have the income capacity to make the payments.  Collateral is the home and its value.  If you can pass the 3 C's then an approval will usually be issued. 

Once the file comes out of Underwriting there are almost every time conditions.  This is still an approval, but the LO will have to meet additional criteria and sometimes provide additional documentation from the Veteran to get a final approval.  Once the underwriter is satisfied and all the VA conditions are met then you will be to close your loan.  An important thing to remember is that the Underwriter will also issue funding requirements.  This means after closing there might be additional work that needs to be done in order to have funds dispersed.

The whole process of Underwriting can take up to 60 days.  I have personally seen it take this long because of too much volume and not enough underwriters.  Usually though it takes about 1 to 2 weeks.  Don't look at underwriters as someone who doesn't want your loan, in fact its just the opposite.  They want to have the work and approve files.  They plan an important role in the VA mortgage industry and will continue to do so.

Application The first step in the official loan approval process; this form is used to record important information about the potential borrower necessary to the underwriting process.

Appraisal A document that gives an estimate of a property's fair market value; an appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property.

Appraisal. A professional opinion of the market value of a property.

Appreciation. An increase in the value of a property due to changes in market conditions or other causes.

ARM Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the Change in monthly -payment amount, however, is usually subject to a Cap.

Assessed value. The valuation placed upon property by a public tax assessor for purposes of taxation.

Assessor: A government official who is responsible for determining the value of a property for the purpose of taxation.

Assumable mortgage. A mortgage that can be taken over ("assumed') by the buyer when a home is sold.

Assumption. The transfer of the seller's existing mortgage to the buyer.

B

BAD CREDIT REFI (REFINANCE): Lenders may offer bad credit refinance packages to help owners pay off debts and restructure mortgages to improve credit. Other programs assist homeowners in fighting foreclosures by providing interest-only solutions, debt-consolidation plans, and extended-term loans.

Balloon Mortgage: A mortgage that typically offers low rates for an initial period of time (usually 5, 7, or 10) years; after that time period elapses, the balance is due or is refinanced by the borrower.

BC & D Lender or Loan term BC & D is a rating of the loan. Similar to Moody's Rating scale for Bonds as AAA, AA, A, etc. Generally, loans termed as A paper are for borrorwers with very good credit. BC & D lenders specialty in BC & D loans. For the most part, on our web site, we refer to BC& D as "problem or troubled" credit rather than using these letters.

Bankruptcy: A federal law Whereby a person's assets are turned over to a trustee and used to pay off outstanding debts; this usually occurs when someone owes more than they have the ability to repay.

Binder. A preliminary agreement, secured by the payment of earnest money, under which a buyer offers to purchase real estate.

Borrower: A person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan terms.

Building code: Based on agreed upon safety standards within a specific area, a building code is a regulation that determines the design, construction, and materials used in building.

Budget:A detailed record of all income earned and spent during a specific period of time.

Buydown:process of paying additional points on the loan to reduce the monthly mortgage. There are typically two specific types: a Permanent Buydown, and a Temporary Buydown. In a Permanent Buydown, a sufficient amount of interest is prepaid to lower the rate permanently. In a Temporary Buydown, only a sufficient interest is paid to lower the payment for the first three years. The reason to Temporarily Buydown a loan is to lower the current payments thereby more easily qualifying for the loan. This usually makes sense because income will usually continue to increase as the interest rate does. The most common Temporary Buydown is called 3-2-1, meaning three percent lower the first year, two percent lower the second year, and one percent lower the third year.

C

Cap. A provision of an ARM limiting how much the interest rate or mortgage payments may increase or decrease.

Cash reserve. A requirement of some lenders that buyers have sufficient cash remaining after closing to make the first two monthly mortgage payments.

Clear title. A title that is free of liens or legal questions as to ownership of property.

Closing. A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs. Also called "settlement."

Closing costs. Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Also called "settlement costs."

Commitment letter. A formal offer by a lender stating the terms under which it agrees to lend money to a home buyer.

Condominium. A form of property ownership in which the homeowner holds title to an individual dwelling unit, an undivided interest in common areas of a multi-unit project, and sometimes the exclusive use of certain limited common areas.

Contingency. A condition that must be met before

Conventional mortgage. Any mortgage that is not insured or guaranteed by the federal government.

Convertible ARM. An adjustable-rate mortgage that can be converted to a fixed-rate mortgage under specified conditions.

Cooperative. A type of multiple ownership in which the residents of a multi-unit housing complex own shares in the corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

Covenant. A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.

Credit report. A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.

D

Deed. The legal document conveying title to a property.

Deed of trust. The document used in some states instead of a mortgage; title is conveyed to a trustee rather than to the borrower.

Default. The failure to make a mortgage payment on a timely basis or to otherwise comply with other requirements of a mortgage.

Delinquency. A loan in which a payment is overdue but not yet in default.

Deposit. See Earnest money.

Depreciation. A decline in the value of property; the opposite of "appreciation."

Discount points. See Points.

Down payment. The part of the purchase price which the buyer pays in cash and does not finance with a mortgage.

Due-on-sale clause. A provision in a mortgage allowing the lender to demand repayment in full if the borrower sells the property securing the mortgage.

E

Earnest money: money put down by a potential buyer to show that he or she is serious about purchasing the home; it becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal.

EEM: Energy Efficient Mortgage; an FHA program that helps homebuyers save money on utility bills by enabling them to finance the cost of adding energy efficiency features to a new or existing home as part of the home purchase

Equity: an owner's financial interest in a property; calculated by subtracting the amount still owed on the mortgage loon(s)from the fair market value of the property.

Escrow account: a separate account into which the lender puts a portion of each monthly mortgage payment; an escrow account provides the funds needed for such expenses as property taxes, homeowners insurance, mortgage insurance, etc.

F

Fair Housing Act: A law that prohibits discrimination in all facets of the homebuying process on the basis of race, color, national origin, religion, sex, familial status, or disability.

Fair market value: The hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully, and with complete knowledge of the situation.

Fannie Mae: Federal National Mortgage Association (FNMA); a federally-chartered enterprise owned by private stockholders that purchases residential mortgages and converts them into securities for sale to investors; by purchasing mortgages, Fannie Mae supplies funds that lenders may loan to potential homebuyers.