Underwriting Timing

Why does it feel as though lenders are changing loan terms, and coming up with unreasonable and strange requests at the last minute?

In the loan process there is something called underwriting, the review of all loan documents, and verification of the deal information; the lender’s due diligence. Rates and terms are quoted based on provided information, it is only after underwriting that firm commitments and contracts are issued. This is similar to making an offer after walking a property, and then adjusting the offer, or keeping it, based on the home inspections.

This is the last step before closing is scheduled, the property is purchased, and the loan is closed, but it does not begin until the appraisal is received by the lender; one to two weeks after the loan process was started and the appraisal was ordered. When the appraisal comes in is when underwriting begins, even though the loan application and documents may have been submitted weeks prior.

As the loan is reviewed, based on the available information, changes may be required and requested by the underwriter. Because of the truncated schedule investors operate on, this underwriting is happening days before the scheduled closing. As a result any changes, justified as they may be, feel like they are being made and requested unfairly, at the last minute.

Providing all requested documentation promptly, and allowing a few extra days for underwriting prior to closing, makes the process smoother and easier for all. It may feel like so much time has passed, and if there were issues with the loan something should have been mentioned, but in reality until all information is available the loan file just waits. And all information is usually available with the closing only days away, and no time to spare.