I hate the words, “That’s just our policy.”
They’re so cold, unforgiving and final. Those words give great power to the person saying them, and they end a conversation to the person receiving them.
Wouldn’t it be nice to know why the policies exist if your loan is rejected under one of them, and what needs to happen to maneuver around them?
Mortgage underwriting guidelines are the policies of the lending world. Guidelines are followed strictly in today’s environment, which is very different than in the recent past. Over the past five years, there have been many new guidelines introduced and substantial changes to previous guidelines.
Nonetheless, the fundamentals of qualifying for a mortgage loan today are the same that they’ve ever been. If you meet underwriting guidelines in the areas of income, credit, down payment and property, you qualify. If you don’t, there’s a reason why, and it is in black and white.
Mortgage underwriting guidelines are written by the organizations that purchase and insure mortgage loans. Banks and mortgage lenders follow those guidelines — to the letter, in most cases. Fannie Mae has a Selling Guide, Freddie Mac has a Seller/Servicer Guide, Housing and Urban Development has a 4155 Handbook and publishes Mortgagee Letters, and the Department of Veterans’ Affairs simply calls its version a “handbook.”
In my 17-year career in the mortgage industry, I have worked for big banks, small mortgage brokers and regional mortgage banks. Not one of these firms required me to read any of the underwriting guidelines, nor have I heard once from my colleagues in the industry that their employers required them to read any guidelines.
Yet, we are on the front lines talking to clients every single day about the specifics of whether they qualify to buy or refinance a home. I just think that’s strange.
When I first entered the mortgage industry, I made a costly error by simply not knowing about an underwriting guideline. This mistake cost my client thousands of dollars as a result of causing a delay that necessitated extending their rate lock. Because of that lack of knowledge, I began to read underwriting guidelines and eventually read all of them. I remember being amazed that in just my first year, I knew more about how to put loans together than most of my fellow co-workers and competitors.
The same epidemic about lack of knowledge is present today, and perhaps more so with all of the changes that have occurred. I hear all the time from clients that their loan applications were rejected, but they don’t know why, let alone what to do to qualify.
If you can’t qualify today, you simply need to find out what the issue is and shore up the reason for the decline. Then you’ll meet the minimum requirement in that area and qualify for the loan. A good lender should be willing and able to discuss the guidelines with you so that you understand what it takes to qualify.
The lesson here is that if loan originators or underwriters say they can’t do something, it’s somewhere in the black and white underwriting guidelines. Find the problem, fix it, and you’ll get the loan.
Gabe Terreson, branch manager of Home Team Funding, is a 17-year industry veteran who conducts training for mortgage consumers and real estate brokers. He can be reached at 360- 993-5800, via email at firstname.lastname@example.org or online at www.hometeamfunding.com.