Satisfy the underwriter’s checklist of borrower conditions
When your application is approved it’s important to check the underwriter’s
checklist of borrower conditions. This list will specify everything that
you need to do in order to ensure that their loan will be approved for
closing. The conditions often include requests for alternative and supplementary
documentation, explanation and correction of anomalies, and verifications
and attestations.
Lock in your interest rate and loan terms
Once you know when your transaction is going to close, you should consider
locking in the rate. Locking in commits your lender to fund your loan
at the specified rate. It takes the risk of interest rate fluctuations
out of the picture.
Borrower conditions
Each phase of the loan application process involves a number of steps the
loan officer and borrower have to execute carefully in order to ensure
that the borrowers get the best loan available and their purchase comes
to a smooth and efficient close. Consider the following example of what
can go wrong.
Elizabeth had received loan approval and the lender had sent loan documents to the closing agent. She had signed them and put her down payment into escrow, and was expecting the loan to fund, but the lender had refused to fund the loan, stating that she had not satisfied certain conditions. What she had not been shown were the lender's Specific Closing Instruction, a sheet that tells the closing agent what they must do to complete the transaction. Most of these items are perfunctory but a loan representative's foremost job at this point is to assure that someone is taking care of each of these items.
In this instance, the closing agent did not bring these instructions to the attention of the borrower at the time documents were signed, and it sounded as if the loan representative stopped doing his job. While common sense would tell you that it was in their best interest to get your loan funded, it is still your loan and your responsibility to assure success.
Locking in your interest rate and loan terms Locking in your interest rate and loan terms sets your whole application in stone. Lock-ins protect you against increases while your application is processed. However, a locked-in rate may prevent you from taking advantage of price decreases during this period.
Explanation and Correction of Anomalies
Verifications and Attestations
You may be asked for verifications of…
How to satisfy the borrower conditions
As a preliminary step, you should get pre-approved by a reliable lender
before searching for a home. When your lender tells you the loan has been
approved, you should demand to see the approval sheet and work with your
loan rep to assure that you are complying with all requirements. Later,
when you sign your loan documents, get a copy of the list of all remaining
conditions from the closing agent and make sure someone is handling the
items listed so your loan funds come in on time. It’s especially
important to leave plenty of time for items to be corrected on your credit
report, and for any legal issues to be documented and settled by the relevant
authorities. Otherwise, it’s entirely possible for the sales contract
or loan approval to expire before all of the conditions are met. Make sure
any errors on your credit report have been corrected, since the report
is always pulled again just prior to closing.
How to lock in your interest rate and loan terms
Once an appraisal report has been filed with your lender, it may be time
to consider locking in your interest rate and terms. First, get your lender’s
current rate sheet and compare it with the one you kept from when you were
pre-approved. This will show you what has happened to the market since
you began the process. Then you can sit down with your loan officer and
review the rate versus-fee alternatives.
You will also see that every program offers lock periods of 15, 30, 45, and say you have a 45-day escrow. That means you can lock immediately and ensure your rate so long as you close within that 45-day period. You could wait 15 days and lock for 30 days at a slightly cheaper price, but that good rate you got 15 days before may not be available now. Interest rates can change a lot in 15 days. That’s why it generally makes sense to lock in right away and avoid the risk of having increased interest rates blow your deal.
Let’s say you can lock in for 6% and 1 point today but you choose not to do that. If the market moves against you and 15 days later the rate is 6.375%, you are going to have to pay $375 more per year for every $100,000 you borrowed.
Once you have locked your rate it is extremely important that you get a copy of the lock confirmation from your lender. This confirmation is not customarily sent to borrowers, but it is the only way to verify all sources of origination fees, borrower names, loan terms, the interest rate, and the date and length of lock. With the lock confirmation you can verify that your loan representative has honored the agreement you were originally offered. Without it, the loan representative could charge you points “to lower the rate” but leave it high enough to get undisclosed points from the lender, too. A loan rep might even charge you to lock in but not do so, and keep the fee if rates hold.