George Souto does a great job here explaining how the sales contract can raise red flags in front of the underwriter. As a real estate agent you need to know what these red flags are and how to avoid them.
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These days every Mortgage Application is examined very carefully for any sign of possible fraudulent activity. There are several Red Flags Underwriters look for all along the Loan Approval Process, starting from the moment the loan is registered to the final Closing Day. However, the Major Areas Underwriters Look For Red Flags During The Loan Approval Process are:
- Mortgage Application
- Credit Report
- Income Documentation
- HUD-1 (Settlement Statement)
Underwrites also look at one more document they examine very closely which Realtors/Agents are a major part of putting together, the Sales Contract. It is the possible Red Flags on a Sales Contract I want to point out in this blog. There are more Red Flags that could pop up on a Sales Contract than Realtors/Agents may realize, and by being aware of what these Red Flags may be Realtors/Agents can help to avoid some of them. Possible Red Flags on Sales Contracts are:
- Areas that have been whited out.
- Numbers appear to be squeezed together due to alterations.
- Different handwriting and signatures for the same individual.
- Earnest Money Deposit equals the whole Downpayment or is an odd amount.
- Seller Paid Closing Costs when the Buyer has enough assets of their own for Downpayment and Closing Costs.
- Non Arms-Length transaction. For example the Seller is a Real Estate Agent, Broker, Relative, Employer, etc.
- Seller is not presently listed on Title.
- Buyer is not the same person applying for the Mortgage.
- Buyer has been added to, or deleted from the Sales Contract
- Power of Attorney transactions.
- Earnest Money Checks have inconsistent dates. For example Check #101 is dated 11/12, but Check #103 is dated 10/28.
- The name and/or address on the Earnest Money Check is different form the Buyers.
- Contract is filled in, in very few areas with several areas left blank which is not typical of a normal Sales Contract.
The above list is not all inclusive, but it gives a good idea of how closely Underwriters Look For Red Flags During The Loan Approval Process. The more aware Realtors/Agents are of what Red Flags Underwriters are looking for in a Sales Contracts, the more questions they can help eliminate, and reduce Underwriting delays.
Info about the author:
George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam,# Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or firstname.lastname@example.org
Phil Caulfield NMLS #386911 APMC #1850 has been helping people obtain mortgages since 1985. The views, articles, postings, and information listed at this website are personal and do not necessarily represent the opinion or the position of American Pacific Mortgage Corporation.