Purchase Transactions

Written By: Bonnie Wilt-Hild
Senior DE Underwriter & NAMP Instructor

As foreclosures increase so do the steady stream of purchase money mortgage transactions. Originating, processing and underwriting any mortgage transaction is similar. However, there are a few things that we need to pay closer attention to on the purchase transactions, particularly where FHA and VA is concerned.

Origination of a purchase is not significantly different than originating any other mortgage transaction type. However, it is important that originators remember to use the HUD/VA Addendum to the loan application if the mortgage product will be a government loan. Additionally, you must remember to disclose the UFMIP or VAFF as an APR charge on your GFE. In addition to collecting standard documentation such as 1 month worth of paystubs and 2 years W-2 wage statements, you will also need to collect 60 days worth of bank statements which indicate sufficient funds for closing.

If the borrower can not demonstrate these funds at time of application be sure to ask where they are coming from so that you can determine that the source is acceptable. If the funds will come from a gift, collect a gift letter, evidence of the transfer of the gift and donors ability to give the gift and remember to source any other large deposits on the borrower’s bank statements that do not appear to be payroll related. All funds required for closing must be fully documented.

The Contract of Sale must also be collected at time of application with all applicable addenda. You want to make sure that the contract includes the FHA financing addendum which will include the Amendatory Clause and Real Estate Certification. Additionally the contract should contain a "For Your Protection Get a Home Inspection" disclosure or clause and should indicate the financing type as FHA. If the transaction is a FSBO, you may need to have the buyers and sellers sign the amendatory clause found in your LOS.

Once the documentation is collected and the case is originated, turn it in to processing as quickly as possible. More often than not, the contracts will contain drop dates for commitments as well as closing and if it is a bank foreclosure sale, they want to see the commitment by the date indicated in the contract. Processors when you set your file up, cover all of your bases so there are no mishaps prior to loan closing, that is a great way to ruin business partner relationships, particularly where real estate agents are concerned.

Make sure you have all the documentation you need, that you have addressed any situation in the file that might call for additional documentation, recalculate your income to determine that your ratio’s are in order and make sure that all of the data entered in to your AUS is correct. Minor changes to AUS at time of underwriting can result in a Refer and you need to know that before you submit to underwriting.

Underwriters, condition for everything you need and make sure you get it. Don’t skimp on the purchase transactions. More likely than not you are increasing the borrowers housing expense and you want to make sure that they can afford the property that they are purchasing. Document any situation that is not addressed in your AUS findings because HUD will if they pick the case up for a PETR.

Make sure your approvals are clear so that the closing department knows exactly what to do. Do forget to let them know what the maximum cash to close it, maximum seller contribution is and so forth. These items can effect down payment requirements as well as reserves as indicated in your AUS. Remember once they are closed it finished and the funds are disbursed so you don’t have a 3 day right of rescission to get additional things.

Lastly, full documentation is the trend so make sure you are covered from the start. Originators collect everything you might need so you don’t have to keep going back to the borrower and processors do the same from a set up standpoint. If you manage if from the beginning the case should move right through underwriting and close on time. Happy borrowers and business partners mean more business and everyone could use more of that.

About the Writer. As an NAMP staff writer, Bonnie serves as a senior instructor for FHA Online University as well maintains a full-time job as Senior DE Underwriter for a major banking institution. If you would like to become a writer for NAMP, please email us at: blog@mortgageprocessor.org.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)