What Happens in Underwriting After You Go Under Contract in a Richmond Purchase: The Conditions List and What Causes a Delay

Going under contract is not the same as being approved. A pre-approval, which our guide to getting pre-approved explains, tells a seller you are likely to qualify. Underwriting is the stage where the lender checks the actual file against the actual property, and it is where most of the paperwork requests after an accepted offer come from. This is the first of three posts in our series on the road from underwriting to closing. The next two cover what not to do between approval and closing and the three-day rule for the Closing Disclosure.

What underwriting is

The CFPB’s closing guide describes this stage plainly: once your offer is accepted and you have chosen a loan, you submit the documents required for underwriting, which it glosses as approval of your loan. It also says lenders have specialized staff who work on processing and underwriting, so you will usually deal with more than one person at your lender. The underwriter is the person (or the automated system plus a person) who decides whether the loan meets the lender’s guidelines and the investor’s or government program’s rules. You can read the full step on the CFPB’s closing page.

We are not going to quote a typical number of days for underwriting, because the free public sources do not publish one for this market. For how the whole contract-to-closing stretch is laid out, see our guide to how long it takes to close in Richmond.

What the underwriter verifies

Lenders vary in the details, but the file is checked on six fronts. Our post on what lenders look at besides your credit score goes deeper on the first four.

• Income. The lender needs to confirm what you reported. The CFPB’s page on submitting documents and answering lender requests notes that if you receive regular income from a non-employment source such as child support, alimony or rental income, the lender needs proof it can reasonably be expected to continue at the same level.
• Assets and the source of funds. The same CFPB page says lenders are generally required to verify the source of your income and down payment funds, and that it is common for buyers to have large deposits in their bank records when moving money between accounts. Expect to document those deposits. If part of the down payment is a gift, ask your loan officer early, because some loans do not allow gift funds.
• Credit and debts. The file is commonly rechecked for new accounts or balances since pre-approval.
• Employment. Job and pay details are confirmed, and many lenders confirm them again shortly before closing.
• The property: appraisal. The lender needs the home to support the loan amount. If it does not, see what happens if my home doesn’t appraise and the companion piece on a home that appraises below the offer price.
• Title and insurance. The lender wants clear title to the property and proof of coverage. The CFPB’s homeowner’s insurance page says lenders typically require coverage as a condition of the loan, and that you choose the company. It suggests sharing quotes with your loan officer to confirm they meet the lender’s requirements. If the home is at risk of flooding, the CFPB notes homeowner’s insurance typically does not cover flood damage, so a separate policy may be needed. Our title insurance guide explains the title side.

Conditions: what the underwriter’s list looks like

A conditional approval is an approval with a to-do list. Lenders commonly sort that list by when the item is needed, using terms such as “prior to docs” (needed before closing documents are drawn) and “prior to funding” (needed before the loan money is released). The terms and their exact meaning differ between lenders, and they are industry usage, not a CFPB term, so ask your loan officer how yours are defined. A typical list might include:

• An updated pay stub or bank statement if the ones on file have aged out
• A written explanation for any large deposit or a recent credit inquiry
• Proof of homeowner’s insurance with the lender named
• The signed purchase contract and any addenda
• The appraisal, and any repair or re-inspection items it calls for
• The title commitment and any items it asks you to clear

The CFPB’s advice here is practical. Ask your loan officer for precise instructions on how and where to submit documents, submit copies and keep your originals, confirm the right person received them, and respond quickly. It also warns against submitting incomplete documents: include every page of a multi-page document, even pages marked “intentionally left blank.”

Documents you may be asked for again

It is normal to be asked for documents you already gave at pre-approval. The CFPB’s step-by-step page says the lender needs to review your financial information carefully and that you may be asked to submit documents verifying what you reported earlier. Common repeats include recent pay stubs, bank or retirement statements, tax returns or W-2s, and identification. Stay reachable: the CFPB tells you to check your email, voicemail and postal mail frequently and make sure your loan officer has current contact information.

What “clear to close” means

“Clear to close” is the lender’s way of saying all underwriting conditions have been met and the loan is ready for closing documents. It is a lender term rather than a CFPB definition, and the exact timing of the signal varies. Around this point the lender prepares your Closing Disclosure, which the CFPB says lenders are required to provide three business days before your scheduled closing. Use those days to compare it with your most recent Loan Estimate. The CFPB’s Closing Disclosure explainer walks through each check: name spelling, loan amount, interest rate, prepayment penalty, balloon payment, total monthly payment, closing costs and cash to close. Another post in this series covers the three-day rule in detail.

The CFPB also reminds buyers that you cannot bring actual cash to closing: the money typically needs to be a cashier’s check or a wire transfer from a bank, so confirm with your closing agent what form of payment is required. Verify any wiring instructions you receive by phone with a number you already know.

What delays look like

Delays usually come from a short list of causes, which our guide to what can delay a Richmond closing covers in full. In underwriting itself, the common ones are a document that is missing pages or unreadable, a large deposit with no explanation, a change in your job or debts, an insurance quote that does not meet the lender’s requirements, an appraisal that comes in under the contract price, and a title issue that has to be cleared. A rate that is not locked long enough can add cost to a slow file, so read how rate locks, float-downs and extensions work.

Property type can also change the file. Buyers in Short Pump, Bon Air or Church Hill face the same underwriting questions on income and assets, but the appraiser draws comparable sales from the local area and the age and condition of the house can affect insurance, so a request that surprises one buyer may not another. Browse the Henrico, Chesterfield and City of Richmond hubs to see each locality’s listings. If you are still looking, browse current listings before you make an offer.

Underwriting questions