Once you've received a pre-approval for a mortgage, what happens next to get to a final approval and clear to close?

After the initial pre-approval, submission of up-to-date documentation, such as proof of income, employment, credit history, asset information, and collateral, may be required if it's older than 30 days. It's important to note that not all mortgages require the same documentation. For example, if you are self employed and applying for a no-income or limited-income loan, the underwriting requirements will be different from that of a full doc loan. In most cases the lender requires an appraisal and title report for the property being used for collateral upon loan submission. Your loan officer will guide you along the way with these items and all other conditions necessary to get the loan file into underwriting.

When the information is received by the lender, a loan processor will organize it, calculate income, loan-to-value, and check for any missing items prior to sending the loan file into underwriting. When the underwriter receives your file, they will look at your credit, income, asset, and employment history and then verify all of that information in your file. Additional stipulations may be required at any time to ensure the underwriter has all necessary items needed to provide a loan approval. Appraisal and title report typically come in shortly after income and asset information is submitted. Once both appraisal and title are received, the underwriter will review those items and review your file again to make sure any outstanding stipulations have been cleared. They will do a final re-verification of all income and asset information before they approve your loan for closing.

The five Cs can be used as a guide for what underwriters typically look for from borrowers no matter what type of mortgage you're applying for.

1. Character: Refers to borrower(s) credit history and score(s). Credit reports show your payment history and how you have paid creditors overtime.
2. Capacity: Ability to pay the mortgage. Calculations are used to measure how much of a mortgage you can afford based on income and present debt obligations.
3. Capital: Assets or reserves you have in savings. These amounts can differ depending on mortgage type. For example, a purchase could require verification of down payment whereas a self-employed borrower applying for a limited doc loan may need to provide additional reserves/savings as proof of the ability to pay.
4. Collateral: The asset/property to which the mortgage lien will be attached. The appraisal will determine property value and provide a detailed description.
5. Conditions: The loan purpose and terms. For example, if you are someone who is looking for a cash out refinance, you may be required to supply additional information stating what the money will be used for.

Bottom line: It's important to remember all loans are underwritten according to lender guidelines. Depending on the type of mortgage you're applying for, stipulations will vary from borrower to borrower.

Source: Mortgage Market Guide