An experienced loan officer, that is. Gone are the days when your loan officer gathers up absolutely everything needed for the loan file before sending it over to another individual, the underwriter, for a loan approval. Even if some of the documentation isn’t ultimately needed for an approval. Paper loan files would be several inches thick. Consider not just tax returns and bank statements but title work, appraisals and W2 forms just to name a few. With the advent of automated underwriting however, an approval is essentially approved upfront before any physical underwriting has even begun.
When someone submits a loan application, the loan is converted to a format that allows for an electronic approval. The basic information on the application is input. Income, assets and other financial aspects of the applicant is entered and then transmitted to the loan officer. The loan officer then submits the file to a digital approval. Within moments, the ‘findings’ tell the loan officer what is needed for a final approval. This is where the loan officer sees whether or not the loan can be approved.
But it doesn’t stop there. The automated approval is issued without the benefit of reviewing supporting documentation. If the initial application says the applicant makes $7,000 per month, the automated approval will assume that amount. The documentation will come later. The higher the quality of the loan file will typically result in less documentation needed. Someone with a 760 credit score and a down payment of 25% of the sales price will submit less supporting documentation than someone with 5.0% down and a 620 score.
Upon an initial loan submission and right after receiving the preapproval conditions, your loan officer will know whether or not you’re going to be approved. This is the stage when your preapproval letter is issued. The preapproval letter basically means that all that needs to be done is to find a home and then make sure the appraised value comes in as needed.
Even at this juncture, the quality of the loan file can dictate what type of appraisal is needed. Is a ‘drive-by’ appraisal needed, where the appraiser simply drives by the property for a visual inspection? Or maybe just a desk appraisal is needed, where the appraiser doesn’t visit the property at all but gathers research from the desk regarding recent sales of similar properties in the area.
The appraisal can shake things up a bit. The loan officer can issue a preapproval for the applicant, but the property must also be approved. This can mean that a preapproval was issued but for some reason the property didn’t appraise at the sales price. A preapproval can also be declared void if the income or employment documentation doesn’t support the information that appeared on the initial loan application. Yet, when the supporting documentation does indeed verify what appears on the loan application, the loan approval should sail through. This is why your loan officer should know in advance if you’re going to get across the finish line with a solid, final loan approval.
