You finally hear the words you’ve always wanted ‘you have final underwriting approval.’ Many people breathe a sigh of relief at this point. But it may be a bit premature. While it does mean that you tackled many mountains, it’s not the end of the road just yet. The final underwriting approval is just another step in the underwriting/approval process.
So what happens now and what exactly does it mean? We help you understand the terms below.
The Definition of Final Underwriting Approval
Final underwriting approval means the underwriter completed the underwriting process on your loan and you passed. The underwriter is the person that evaluates all of your documents for the loan. This includes your pay stubs, W-2s, tax returns, asset statements, employment documents, appraisal, and credit report.
The underwriter goes through a series of steps to get to this point. Originally, the underwriter pre-approves you for the loan. He or she does this by giving your qualifying documents a cursory glance. Upon acceptance of the pre-approval, the underwriter takes a deep dive into your qualifying documents. This is when you may receive an ‘approval with conditions.’ The lender may need further documentation to render a decision on your loan.
Once you supply all of the necessary documents, the underwriter can give you final approval. You may also hear them say that you are ‘clear to close.’
What Happens After Final Underwriting Approval?
Many homebuyers assume they are ‘in the clear’ when they get final approval, but don’t act too fast. You still have a few steps to get through. The lender still needs to do a final verification of your employment and your credit.
If you changed anything in between the time you submitted your documents and the closing, this is when the lender will figure it out. For example, if you went out and bought a ton of furniture and charged it – the lender will see it on your credit report. If you changed jobs, the lender will find out when they verify your employment before the closing.
It’s important to keep everything status quo after you apply for a mortgage. If you do change anything, let the lender know as quickly as possible. If the lender finds out about a major change during the final steps after approval, you may lose your loan approval.
After Passing the Final Verifications
Once you pass the final verifications of your credit and employment, the lender must send you a Closing Disclosure. This document is similar to the Loan Estimate you received at the start of the loan process. The Closing Disclosure should be updated to reflect the costs you will have at the closing.
The lender must send you the Closing Disclosure at least three business days before the closing. This gives you enough time to compare the Loan Estimate and Closing Disclosure. Look closely at all aspects of the documents, comparing the fees and even the monthly payment side-by-side.
If anything changed, such as the interest rate, points, or lender fees, ask for clarification. If something doesn’t seem right about the cash to close the loan, ask the loan officer. This is your time to ask questions, have details fixed, and make sure there aren’t any surprises at the closing table.
The Final Approval
Your true final approval doesn’t occur until you sign the documents and money exchanges hands. Up until that point, anything can change. That’s why it’s so important to keep everything as stable as you can. Life happens and lenders understand that. But you must keep lenders informed of the changes in order to ensure that you get through the closing with smooth sailing.
Getting through underwriting can seem tricky, but with the right loan officer by your side, it’s possible. Make sure to stay in close contact with your lender throughout the process so that you know where your loan stands. Keep the lender informed of any changes you make and ask the same of them so that you are both on the same page. This allows you to get to the closing table with ease.