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Writing Contracts That Breeze Through Underwriting

Personal Property
Although seemingly benign, of all of the sections in the sales contract this section has the potential to cause the most damage from the underwriting perspective. Although the verbiage in this field includes no contributory value , the reality is, everything has value and the secondary market of course knows this. As such, anything entered in this field can potentially be considered an inducement to purchase and is hence not allowed. To compensate for this, if there s any personal property listed here the underwriter has the authority to assign a value to it and then lower the buyer's loan amount by and equal dollar figure. This causes the buyer to now have to bring that amount extra to the closing table. Having a delayed closing due to a loan amount adjustment required to compensate for "lawn equipment and potted plants on the patio" is not fun or ok with any party to the transaction.

Think of it this way, the residential sales contract is for the conveyance of real estate, not personal property, so best practice is to leave the personal property section blank and handle miscellaneous items separately on an addendum.

Loan Commitment Dates
Prior to a loan going in for underwriting the loan file has to be processed and prepared for review. Anyone that s worked with us for a while can confirm that we more often than not get a clear to close on the first loan submission, its very rare that we require an extension and loan denials are even rarer. This is because we follow a process on each loan file to ensure the cleanest and quickest underwriting result possible. The Loan Commitment section of the contract can cause issues with not only proper loan processing but underwriting approval as well.

We re all very familiar with home inspections in that they take quite a few hours and are therefore quite expensive. The cost is however well justified as a thorough home inspection is paramount to ensure your client s new home has integrity and your client will be safe and secure. In keeping with that would you feel comfortable allowing your buyer to purchase a home when the home inspector has only been allowed 10 minutes to inspect it? The answer is of course not, definitely not!

We often see contracts written where the requirement for Loan Commitment is 5, 10 or 15 days from the Effective Date. We realize that Sellers request this so they can feel good about the buyer so they can move forward with their plans. That makes sense and it s understandable but to follow the previous example above, is any party to a transaction really going to be comfortable with a Loan Commitment that has a ton of prior to closing conditions listed because the file was rushed and was not fully underwritten? Again definitely not! The honest truth is everything is electronic now so any lender can get a Loan Commitment from any investor in just a few days. But until a really long list of documents AND all the 3rd party verifications that go along with it are reviewed by an underwriter, a loan commitment doesn t have the integrity everyone is truly looking for.

The loan process is just like the home inspection process , in order to do it right and for the loan commitment to have integrity there is a process that must be followed. Requiring any lender to rush that process is of zero benefit to any party to the transaction. For the benefit of all parties to the transaction best practice is to leave this field blank so the default of 30 days will apply.

Appraisals
Ordering appraisals is one of the many tasks completed during the loan processing period. Everyone wants their appraisal ordered ASAP and the rush to get it on order often results in lenders receiving contracts that are not valid as presented. Before submitting a contact to your lender make sure these two points are covered:

  1. Make sure Seller on contact is actually the Seller and/or make sure Seller is titled correctly.
  2. Ensure that the contract and all applicable addendums are signed, initialed and dated by ALL parties.

Why You Should Call Us First
Ordering appraisals is one of the many tasks completed during the loan processing period. Everyone wants their appraisal ordered ASAP and the rush to get it on order often results in lenders receiving contracts that are not valid as presented. Before submitting a contact to your lender make sure these two points are covered:

  • Detailed loan status updates save you the time and hassle of trying to find out what's going on with your loan file.
  • Quick and efficient problem resolution system. Our workflow is designed not only for speed and efficiency but to also catch any potential problems. We don't bury our heads in the sand in the 11th hour.., we work diligently to identify any potential problems up front and work directly with you to resolve them.
  • Experienced processing staff pre-underwrites loan files before submission to our investors. Detailed review ensures that the majority of our loan files are put into final approval status at the first submission.
  • We're local and accessible when you need us. When you're working, we're working even if it's after hours or the weekend.
  • Ensure that the contract and all applicable addendums are signed, initialed and dated by ALL parties.

Questions/Answers - The More You Know

Is there a topic, program or guideline you'd like to know more about? We strive to make these monthly emails as informative as possible, so if there's anything you'd like to know more about please just let us know! Simply email us your question and we'll put the information together for you and include it in a future newsletter!

Contact Us

For more information on how our programs can help you, please just call our office at 321.757.5009 and ask for Wendy or Havana. Or, simply send an email to info@aloaninthesun.com



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