Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Shmuel has over two decades of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. Shmuel provides a uniquely holistic approach to comprehensive real estate and financial matters that goes well beyond any single transaction. Shmuel is an award-winning financier recognized for maximizing the short-term and long-term objectives of his client. As a contributing writer to many local and regional newspapers and publications, his insights have been featured in the media for many topics, including mortgages, personal finance, appraisals, and real estate trends.
I recently had the privilege of providing mortgage financing to a young couple buying a home in Bergen County. On paper, the loan looked like many other loans that I have done without issue in the past. In speaking with them further however, I was told that they had already lost their initial contract deposit on another home they were trying to buy a few months earlier. They were recommended to me from an Attorney who simply told them that I would be honest and upfront with my assessment of the situation.
They Were Approved
In detailing the story of what happened, they still could not understand how it all unraveled because they were in fact given a mortgage commitment of approval for the house they wanted to buy. The “big name” bank they were dealing with offered them very competitive rates and fees because of their “relationship” and the fact they had been banking with this bank for almost twenty years. They were very satisfied with the loan officer at the branch that they began dealing with, but after the loan application was submitted, they were handed-off to some loan processing department and had almost no further contact with the local branch representatives.
The Mortgage Commitment
I received a copy of their “mortgage commitment”. Yes, there it was in black and white… “Congratulations – We’re happy to tell you that your loan application has been approved based on the terms and conditions included in this Commitment Letter, so please be sure to read all the information carefully”. I don’t know if they or if their attorney read through the pages of the commitment, but I sure did. The approval had almost thirty contingency conditions that were required in order to get the necessary clearance for closing. Those prerequisites included critical income verification that was not done, required asset documentation that was not satisfactory as was submitted, and it was also mandatory that they sell their current home prior to closing on this home. Granted their home was on the market, and priced to sell – and they did not want to carry both homes, but they were not aware whatsoever that it was a requirement of the mortgage commitment.
Knowing The Process
This article is not about pointing fingers and casting blame, but more so about offering advice on how to handle the mortgage process before and after one receives their commitment/approval. You see, for some banks, the “approval” is often merely a checklist of items that may or may not have been provided initially, and that may or may not actually satisfy the requirements needed to get the loan “cleared for closing”. It used to be, that the mortgage commitment was the benchmark in the process that told all parties that the loan and term they set out to obtain was accepted. Today, unfortunately, with most banks, until you get the formal “clear to close”, the commitment may be meaningless.
Whether you are buying a home or refinancing a loan, it is important to carefully review the mortgage commitment with a competent person at the bank. The expiration dates of the approval, the deadline for the rate-lock confirmation and the actual conditions of the commitment should be carefully analyzed. If there are documentation that cannot be provided as requested, if there are dates that are not likely to be adhered to, if there are requests that are unclear or unreasonable, the commitment if front of you may be meaningless and immaterial. Remember, the objective of applying for a mortgage is not only to be APPROVED, but also to get to the FUNDING as presented to you on day number one.
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