The benefits of upfront underwriting for home buyers and sellers

In today’s housing market, demand is extremely high, and supply is low.  Freddie Mac (the second largest mortgage loan servicer in the country) estimates the US is 4 million homes short of being able to meet home buyer demand, this means presenting a strong purchase offer to a seller is crucial.  While submitting a cash offer is the best way to, “wow” a seller, upfront underwriting is a close second.

What is a pre-qualification?

When one begins their search for a home, the first step is typically understanding how much financing they qualify for. Speaking to a loan originator is the best way to understand what that maximum loan amount is, and a pre-qualification is the first step in that process. 

A typical conversation will include:

How much to do you make?

How much do you have available for a down payment?

What is your credit score? 

Do you have any debt?

Questions like these will give a loan officer a good idea as to what one’s buying power is, but without supporting documents a pre-qualification is pure speculation. 

Are pre-approvals enough to feel confident?

Submitting an offer to purchase a home with just a pre-qualification can be hazardous and leave a borrower’s escrow at risk.  Therefore, most mortgage professionals will complete a full pre-approval.

Pre-approvals require documents including:

  • tax forms – W2s for wage earners, and full tax returns for self-employed borrowers
  • paystubs for wage earners
  • bank statements or retirement accounts showing cash to close
  • credit report & documentation for any debts not appearing on the credit report

With these documents and an automated underwriting system, a loan officer is able to issue an accurate pre-approval.

*Automated underwriting systems (AUS) use advanced algorithms to determine mortgage eligibility, without an approval from AUS conventional and government loans are usually not possible. Exceptions do apply.

*Non-QM loans do not require AUS (learn more about Non-QM loans here).

A pre-approval from an experienced Lendz Financial mortgage professional can all but ensure a fast path to closing (appraisal, insurance, and title issues aside). The issue with a pre-approval is not every loan consultant, at every company, is an expert; and often, it can be difficult to differentiate the amateurs from the professions.

An unexperienced loan officer’s pre-approval can still leave a borrower’s escrow at risk and because of this, upfront underwriting might be the most important part of a mortgage transaction for the buyer and seller alike. 

Remove any doubt with upfront underwriting.

Upfront underwriting takes all the documents needed for a pre-approval and places them in the hands of an underwriter.  This extra step gives a borrower an official loan approval prior to the execution of a purchase agreement. A borrower can then present a confident offer and a seller is able to recognize a strong qualified buyer.

Below is a chart breaking down the different qualification methods:

Working with Lendz allows for upfront access to the underwriter. This special admission positions a home buyer for a fast risk-free purchase that can compete with cash offers. The underwriter will always make the final decision on a loan.  Borrowers unsure of their purchasing power should always take advantage of upfront underwriting to mitigate risk and ensure qualification.


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