FHA Conditional Approval - Are these reasonable?

[SweetLanis]

I'm wondering if I could get the opinions of the awesome mortgage experts regarding our conditional approval. Are these horrible conditions and cause for major concern?

● Provide insurance agent for homeowners insurance 

● E-sign 4506 form

● Copy of earnest money check and bank statement showing cleared

● Terms of withdrawal for 401k

● 2018 & 2019 W2's for husband

I have submitted all docs yesterday. Also, 1 of 2 of 401ks are eligible for withdrawal now, but the other is not until retirement. I'm also wondering why they only asked for my husband to e-sign the 4506. He has 2 jobs, one that is a 1099 that we aren't counting as income because it hasn't been 2 years. 

Thanks so much ya'll!!

Let me know if you have any questions at all.

[Faith_Hope]

Hi @SweetLanis! I've already provided or will have to provide all those. I haven't done the proof of insurance but it's on the list. We're waiting on a closing date. But those exact documents in addition to my husband's business P&L were requested. Im also doing a FHA loan. 

Best wishes!! 😊

[zerofire]

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@SweetLanis wrote:

I'm wondering if I could get the opinions of the awesome mortgage experts regarding our conditional approval. Are these horrible conditions and cause for major concern?

● Provide insurance agent for homeowners insurance 

● E-sign 4506 form

● Copy of earnest money check and bank statement showing cleared

● Terms of withdrawal for 401k

● 2018 & 2019 W2's for husband

I have submitted all docs yesterday. Also, 1 of 2 of 401ks are eligible for withdrawal now, but the other is not until retirement. I'm also wondering why they only asked for my husband to e-sign the 4506. He has 2 jobs, one that is a 1099 that we aren't counting as income because it hasn't been 2 years. 

Thanks so much ya'll!!

Let me know if you have any questions at all.

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Sounds like your being conservative with your mortgage. The lender will love dealing with you. As for the conditions they are quite generic overall and if you look closer you will understand what they are for. Here is a better explanation:

1. Provide insurance agent for homeowners insurance;  This is a fancy way that someone got out of a lending catalog that says we want to know who is underwriting the policy for the house. Insurance is mandatory if you have any kind of mortgage as lenders do not like unnecessary risk.
2. E-sign 4506 form;  This is a bit of a stretch but it is part of the finding of income portion of getting a mortgage. The lender does not trust you after the latest economic upheaval so they want to check with the IRS if your lieing or not.
3. Copy of earnest money check and bank statement showing cleared;  This is verification of deposit and funds on hand. Lender wants to know what funds you have sitting around to pay them off.
4. Terms of withdrawal for 401k;  If your approaching retirement age this is another income verification. Even if you will enter retirement age in the middle of the mortgage any decent lender will ask to take a peek at your retirement funds to make sure you can use them as collateral.
5. 2018 & 2019 W2's for husband;  Another inspection of income but this time from an employer. They want to be able to garnish if they have to.

Everything here is more or less standard discovery. Remember lenders try to verify income, obligations, and expenses as well as they can to guarantee they will be paid back as the first lender.

[SweetLanis]

Thanks so much for the feedback @zerofire!! I really appreciate your time and knowledge- truly!

Typically how long after conditions are met will someone get their final approval? The wait is excruciating, but I have to say I'm proud of myself for not hounding my lender with calls & emails during this entire process. 

Thank you and be well!

[SweetLanis]

@Faith_Hope looks like our conditions are pretty standard.  what date does your contract show for your close date? Ours is 7/28/22 but hoping we can move it up since it sounds like we're ahead of schedule. Inspection & appraisal has all been done.

Best wishes to you and your family!

[Faith_Hope]

@SweetLanis yes, I wasn't worried about the conditions at all. We went under contract in Feb 2022. Our contract didn't have a close date but the house is pretty much done. We're only missing two minor items that the builder has--it's just not installed yet. The sales agent should be giving us a close date by next week. We haven't done the appraisal or inspection yet but hopefully it will be by the end of this month 

At what point in your process did the appraisal happen? Were your appliances installed? Were you missing any fixtures? Or was the house pretty much completed?

It's going on 120 days since my initial app. Our documents/scores expire this weekend so back to underwriting we go next week or the week after 😫. I'm just ready for it to be over!! We're first time buyers and the anxiety I feel at times can be very overwhelming.  Our rate expires 7/28 so I'm hoping to close before then to avoid additional fees. 

Seems like we may be closing around the same time-frame. Thanks for sharing your experience. Hang in there! 🙏🏼🙏🏼 

[Mdowning30]

I would have kept the money in the 401K and looked into Down Payment grants. Their is many assistance programs and grants that cover 3 - 3.5% for down payment and/or closing costs.

[MortgageMama]

Those are all very common conditions. Following are some explanations:

● Provide insurance agent for homeowners insurance - The lender will contact your agent to obtain the final policy and have them include what is called a mortgagee clause. Remember, the home is collateral for the mortgage. If a claim is made, the lender is a party to it. Plus, your insurance premium will be paid from your escrow account each year so the lender needs to know where to send it.

● E-sign 4506 form - This form is used to obtain tax transcripts from the IRS. The lender will verify that taxes have been filed and that you don't owe any back taxes.

● Copy of earnest money check and bank statement showing cleared - All assets used for the down payment or closing costs must be documented and that they come from an acceptable source. i.e. Didn't come from a loan or recently deposited cash from an unknown source.

● Terms of withdrawal for 401k - Ditto from above. You should provide them with the agreement the 401K administrator gives you once you request the loan/withdrawal. The lender just needs to know if there will be a monthly payment associated with it or if it's a straight withdrawal.

● 2018 & 2019 W2's for husband - Totally normal

Hope this helps!

[SweetLanis]

@Faith_Hope  it does look like we are somewhat on the same timeframe! We are purchasing an already built home with appliances there. We went under contract on 5/11, appraisal was done on 6/1 and received our conditional approval on 6/14. 

I have been eating, breathing, sleeping all things loan and like you, wish it to be all over! The myFico forum has helped me a great deal with everything though!

Crossing fingers for both of us to close before 7/28!

Be well!

[SweetLanis]

@Mdowning30 were actually not looking to take out our 401k. I believe the lender is just looking at it in the perspective of collateral.