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From rushing to see new homes on the market to the tedious applications for financing to the nail-biting of waiting for an offer to be accepted, anyone who has purchased a home knows the emotional ups and downs of the process. Unfortunately, the real stress can come much later. Your offer is accepted, the mortgage company approved the loan, and you close in a few weeks. Things look great.
Enter the opposition: the mortgage underwriter.
An underwriter or loan processor's role is to look for any suspicious financial activity that would make you a bad person to lend money to. While the actual lender is usually more than happy to give you a (very high) loan, the underwriter exists to review your risk level.
The information and documents you submit for a loan will be examined every way possible... and then the questions begin.
Generally, an underwriter examines your accounts and spending behavior for the past two to three months. Even if everything looks normal, you might have money in your account that isn't explained through income or account-to-account transfers. The questions you might be asked about this money can seem invasive, which might make you wonder if they are illegal.
Underwriters can (entirely legally) ask you to prove any of the following:
An underwriter can also ask you to provide any of the following:
Anything the underwriter spots while examining two months of statements can open a gateway into years of spending. If one questionable check or charge is in your account, they can ask to see just about anything from any time.
"One-off" gift money or payments are often the hardest to prove. A well-meaning parent might give you a check to pay off the rest of your car. That act can set off an avalanche of proving you own your vehicle, every payment since you got it, the account your parent drew the money from, and more.
It is important to note that underwriters should not be in actual contact with you. All questions and discussions should be handled through your lender or loan officer. An underwriter talking to you directly, or even knowing you personally, is a conflict of interest.
An underwriter might be called abusive or intrusive based on the questions they ask or how much information they request. However, they don't make the rules of their job.
For example, if you send in a document that says "one of five pages," but you left off the blank fifth page, a good underwriter should flag this behavior. They can't know what was on that last page and should ask you to correct and resubmit the paperwork. Yes, this is as annoying as it sounds (probably for you and for them).
All jokes aside, the role of an underwriter is essential and valid. They are there to protect the mortgage company from losing money, and to make sure you aren't buying more house than you can afford.
Sometimes, the home-buying process forms may ask you about your identity, race, marital status, and income. This is different from a professional asking you a derogatory or discriminatory question.
If a real estate or mortgage professional asks you these things, you may have legal rights to take them to court over discrimination laws or the Fair Housing Act.
Know your rights, and what a professional can and cannot ask you in the home buying process. Happy house hunting!