I am currently using Wells Fargo (I know, I know!) for my VA loan. I received an APPROVE/ELIGIBLE through their DU. My question is basically; What does this truely mean? Is this the best outcome possible in DU? If it is, why does it still have to go to an Underwriter? I turned in all documents requested (W2's, Last 2 months Bank statements, Last 2 months of pay stubs, TSP statement). Now I'm doing the underwriting waiting game. Do I have anything to worry about at this point? My credit is absolutely clean (lowest FICO is 707 from EQ), low car payments (total for both is less that $500 a month), and low balance on CC (less than 10% limit). I just don't understand the purpose of the DU if it STILL needs to go to someone else. My LO reviewed everything (all requested documents listed above) and even re-entered my stuff into DU in front of me. What is the actual Underwriter going to do different?
The DU just gives them an idea of if you will be approved for the loan, it does not usually take into account all the paperwork. The underwriting team scours all the paperwork and makes sure everything you have told them and given them is correct.
So again, if they (the underwriters) "scour" the paperwork manually, what's the purpose of the DU? I guess, to me, its just an added pointless step in an already long, stressful process. Based on that, it shouldn't matter what you get in DU since there is so many different outcomes you can get in DU and still go to underwriting.
Typically if you told the truth about the info that was entered in to get a DU approval the underwriters will just manually check all your docs to make sure and you will get an approval. But sometimes if you have some questional stuff the underwriter might want you to write a letter explaining what the heck happened.
Then you have lender overlays, FHA may say something is cool but the lender may say heck no and deny you. That is what happened to me.
I told the truth and everything I turned in we went over together and verified. Orginally I received the pre-approval over the telephone after submitting the pre-approval app over the computer. I had a follow up interview with the WF LO and was told to bring in all documentation, which I did. during the interview, i filled out the full application, and handed over the stack of paperwork. We then went page by page verifying everything. She then went in a updated my information in Du (address update mainly and exact checking and savings balance to the cents) and ran it again which resulted in the same approve/eligible finding. I guess I'm just nervous after reading all these posts about U/W and the nightmare of finding out at the last minute you've been denied.
You should probably be ok, unless you hit some kind of overlay.
DU just approves you based on FHA guidelines, and the underwriter will make sure you fit their guidelines as well.
I had DU approval, went to underwriting and was denied because my wife had issues on her report. A recent late payment on her mortgage. We knew about this so we put her as a non purchasing spouse. DU was cool with this, the underwriters were not.
In April of this year I applied for a mortgage here in Dallas. I got an Approve Eligibe; had good credit of about 675 good income and acceptable debt to income ratios. Went to manual underwriting and was also approved. Got all the way to within a week of closing and got a refer with caution; therefore a denial. The mortgage company ran it 15 20 and 30 years and got refer with caution. The mortgage company did the right thing and refunded my apprasial fee as they never would have accepted the fee if I got a refer with caution up front. I got the news on July 3rd the day before the4th about 11:30 am. At 2pm I called my current lender who felt they could get the loan approved and the loan officer took two hours and submitted my application to the DU underwriting system and got an Approve Eligible. How can one mortage compamy get refer with caution and another get Approve Eligible and they imput the same data? I closed on my refinace this past Friday August 8, 2014. I emailed 4 members of the mortgage company that turned me down/ The DU system is indeed a mystery. Also my second mortgage company which is my current lender the last 6 years had to do another conventional appraisal even though I already had a conventional apprasial that was only 3 weeks old; saying they could not take another lenders appraisal. Why not; they all go thru a third party. What a scam this entire business is.
Hope I can lend some clarity on this issue. I am a mortgage underwriter with a major wholesale mortgage lender.... Often times, even licensed mortgage originators make the incorrect assumption that "Approve/Eligible" means the loan is a homerun approval.... Its not.
First, lenders pay human beings called underwriters no insignificant amount of money to review a loan file, and evaluate risk. A computer program simply cannot do this. DU Approve/Eligible is only the first step.... It basically says, "Based upon the information submitted, the loan APPEARS to meet the agency eligibility requirements." The key word is APPEARS.... Things are not always what they appear.... For example, there are some things that DU cannot determine, such as how many other properties a borrower may own, and if they have sufficient reserves. It requires a human being to look at that. Also, there may be other things that impact your credit worthiness.... I recently declined a loan that received "Approve/Eligible" findings.... Because the borrower had racked up over $4,000 in bank overdraft fees in just the first 6 months of the year.... That was a huge red flag for me as the underwriter that this borrower was not managing their finances responsibly, and would present a significant risk.... That is information that does not appear on any credit report, and is not submitted to DU.... There are also other things that may not be taken into account. Loan originators will often manipulate the loan data, just to get that coveted "Approve/Eligible" finding.... They'll sometimes submit inflated income figures, or put down higher bank balances than you actually have.... We as the underwriters scrutinize the bank statements, and the paystubs, and the tax returns.... Yes, perhaps you make $4000 gross per month.... But then when we take a closer look at your paystub, we see you have a wage garnishment for $200 a week for child support.... But you didn't disclose any child support on your application.... and DU has no way of knowing about it since it doesn't appear on your credit..... so now we add that $200 as an additional liability, and suddenly that "Approve/Eligible" becomes a "Refer w/ Caution/Ineligible". In addition.... There are some things that FannieMae or FreddieMac require be documented in a very specific way.... Perhaps you have $40,000 in the bank.... but what DU doesn't see is that you deposited $30,000 of it last week.... Where did that $30,000 come from? Was it a gift? Gift funds aren't allowed on investment properties.... Was it a personal loan? Unsecured borrowed funds are not allowed...... and we have to make sure if it was a loan that the payments have been accounted for in your debt ratios...... Also, while you may have been honest.... Not everyone is. I had one borrower who provided us with paystubs, but when I looked at the paystubs, I found another red flag..... When I asked the borrower for an explanation, he came clean and said, yeah, those weren't "regular" paystubs.... it was his SEVERANCE pay.... He'd been terminated from his job..... he was trying to get cash out of his house because he had no income anymore..... and when he used up the money, he'd have likely defaulted on the loan and left the mortgage company to foreclose.
For these reasons, and many more too numerous to mention, THAT is why even with Approve/Eligible DU findings, the file still needs to go to an underwriter for review.
Azuretech, thank you for chiming in with your perspective. You guys are so mysterious to us and we are quite frankly scared to death of you! I went through UW in 2010 for the first time and it was just an awful experience. At one point my Husband was caught staring at the ceiling. It's like getting naked in front of the world. I am about to do it again and this time I am prepping for a stronger file.
Everything you wrote makes sense. I just have one question.
How were you able to find out the applicant had 4K of ODs in the 1st 6 months of the year? Did they have some showing on the 2 statements you received, then you asked for all year? I can't imagine how someone can rake up that many fees! It seems impossible!