When you apply for a mortgage you submit your loan application along with all of your supporting documents such as pay stubs, W-2s, tax returns, bank account statements and your credit report to the lender. Your loan officer indicates that your application is complete and has been successfully submitted for review.
A week or two later, your lender notifies you that you have received conditional loan approval but also provides you with a list of additional documents or information you are required to provide.
At this point in the mortgage process you may be confused because you though you provided all of the items the lender requires. These follow-up items are called prior to document requirements because you must address them before your lender orders loan documents and moves your mortgage to the funding department.
Prior to document requirements are the product of the lender’s internal underwriting review process. The lender’s underwriter performs a comprehensive, objective review of your loan application, property appraisal report and title report to confirm that you meet the lender’s underwriting guidelines and qualify for the mortgage.
Underwriting guidelines vary depending on the lender and loan program but focus on your ability to afford your monthly mortgage payment and pay back your mortgage. The underwriter also reviews all of the documents you provided to verify the validity of the information you submitted in your loan application.
In most cases, the underwriter approves your application but with certain conditions, such as follow-up questions or information requests, which are the prior to document requirements. Examples of prior to document requirements include the following:
More detailed tax information
Follow-up questions about your bank or investment accounts, especially if large deposits or withdrawals have occurred in your accounts within the past two months
Additional information on companies or funds you are invested in
Follow-up questions about outstanding debts
Information on loans listed on your credit report that were not disclosed on your mortgage application
A letter of explanation to address an account in collection, late payment or other negative credit event
Detailed employment verification, especially if you recently changed companies, jobs or how you are compensated
Confirmation of property repairs to correct significant issues identified in the appraisal report
Confirmation of the resolution of any impermissible exceptions to title identified in the title report such as ownership disputes or property liens
If you are receiving a down payment gift, financial information for the gift provider
Addition information from a co-borrower or non-borrower household member that is helping you qualify for the mortgage (depending on the loan program)
Updated credit report prior to closing
It is important to highlight that almost all mortgages have prior to document requirements following the underwriting process but it highly unlikely that all of the items above will apply to you. Additionally, a long list of follow-up items does not mean your mortgage is more likely to get declined.
The best way to resolve prior to document requests is to work through them one-by-one with the guidance of your lender. In some cases a legal, tax or financial document satisfies the request and in other cases a written explanation is sufficient.
Being prepared for prior to documents requirements enables you to respond proactively rather than let them delay the mortgage process. If you approach the requests in an organized way, you should find yourself at the mortgage closing table sooner than you think.