The Veridian Blog

Due to historically low interest rates, lenders and brokers are busier than ever and the refinance process can take much longer than expected.  Here is a non-exhaustive list of steps that borrowers can take to help make the process as smooth as possible...

1. Prepare a paper trail for every deposit over $1000 during the last two monthly statement cycles.

This sounds unreasonable, but welcome to my world.  The intent of the lender is to make sure (very sure) that there are no undisclosed loans or obligations.  A large deposit is a tell-tale sign of receiving loan proceeds, or at least something fishy/unusual that will require explaining, particularly if the borrower is salaried.  Any significant deposit will need to be documented and explained.

2. Be ready to explain any large withdrawals during the last two monthly statement cycles.

A large withdrawal is never good news in more ways than one.  It could mean a down payment on a car, boat or house that the lender didn't know about.  It could mean an undisclosed obligation (ie. medical, child support), or other expensive habits.  If a borrower can get away with only a letter of explanation on a large withdrawal, he should be so lucky.

3. Locate promissory note and Deed of Trust for any second loans.

All lenders require these to verify the payment and terms of any second loan to make sure the debt/income ratio is still within acceptable guidelines.  If these documents aren't found, it could take some time to obtain from the lender or the title company.

4. Get organized!

There's nothing worse than delaying the loan when the borrower can't locate a W2 or a rental agreement.  Especially after a rate is locked, time is of the essence and every day wasted brings you a day closer to rate lock expiration.  It's also much easier to get the loan off the ground if the borrower already has all the documentation ready to go.

5. Look at your credit report

Borrowers need to be ready to explain any derogatory accounts, late payments and inquiries.  Most borrowers are surprised at what is listed on their inquiry page - everything from Direct TV to a cell phone company or gas card.

6. Explain gaps in employment or residence history

The standard requirement for employment and residence history is 2 years.  If there is any kind of break or gap during the past 24 months, borrowers should be ready to explain the nature and extent of such break.

7. Familiarize yourself with your 1040 tax return.

Even if a borrower is salaried, if he reports any amount of Schedule C income, it will appear on his 4506 tax transcript and chances are, the underwriter will ask about it.  The same thing is true for extensive Schedule D capital gains or losses, or Schedule E Rents/Royalties that were not disclosed.  The "Wages, Salaries, Tips" line must also be identical to every W2 submitted - so borrowers can't forget about the W2 they received for small temporary jobs.

8. Have your Trust Certification ready if your house and/or asset statements are held in trust.  

Lenders have to make sure the applicant is the trustee, with the authority to manage and control assets exclusively.  In nearly all cases, the lender will have to review the trust or trust cert, or require the borrowers to hold title as individuals.  This usually isn't a big deal, as the borrowers can simply deed the house back into trust after close of escrow.

9. Be wary of and communicate out-of-town trips so you won't miss a chance to sign documents, if necessary.

The only time a borrower needs to be physically close to the escrow company is when documents are ready for signing in escrow.  Even though Power of Attorney forms can be used, they take time to prepare, execute and to send to the lender to review.  It would be prudent of any borrower to notify their broker of any potential absences.

I'm sure there are more but these are probably some of the most common reasons why there could be delays so being prepared ahead of time would make the transaction much smoother.