Underwriting is a crucial stage in the mortgage process. It helps lenders decide whether or not to approve the loan. In addition, the underwriter ensures that the lender doesn’t close mortgages the borrower can’t afford. Therefore, lenders face minimal risk.
Underwriting tends to be expensive for lenders since it involves the underwriter evaluating numerous borrowers’ documents and profiles. In addition, the cost gets higher when there are discrepancies in a large volume of customers’ data and profile because it demands more time and involves several iterations for the underwriter.
Improving the productivity of underwriters is vital. For example, when underwriters handle borrowers’ profiles or documents with no discrepancies, lenders save cost and, in turn, improve turnaround time and closing ratio.
For lenders to achieve this, pre-underwriting is the best way out. Pre-underwriting for lenders
What Does Pre-underwriting Involve?
Pre-underwriting is a provisional process that evaluates and validates borrowers’ documents and financials at the onboarding stage of the mortgage.
It’s a standard practice that underwriting comes up later in the mortgage process, but pre-underwriting takes the action upfront. As a lender, you receive the borrower’s application and documents. Pre-underwriting has it that you give the documents to an in-house junior underwriter to check for possible red flags that will cause problems during the underwriting process.
Pre-underwriting requires good expertise, and several lenders may not have such expertise in-house. However, lenders can seek pre-underwriting support from experienced providers like PrivoCrop.
How Pre-underwriting Help Lenders Boost Their Bottom Line
The pre-underwriting process holds immense benefits to lenders. Let’s see how it all plays out.
Comprehensive Outlook On Borrowers Credit Report
In a mortgage process, a borrower’s credit report is one of the vital documents that needs careful analysis.
Pre-underwriting enables a quality check on the credit report of borrowers. Lenders have the luxury of assessing every aspect of the borrower’s credit report at the onboarding stage of the mortgage.
With this in place, lenders can do away with borrowers having credit reports that do not meet industry requirements before going further into the process.
In all, pre-underwriting gives lenders the confidence that they are dealing with borrowers who can afford the mortgage.
Improves Productivity Of The Underwriter
An incomplete or missing document proves to be one of the many problems during underwriting. Once this happens, it increases the iterations and efforts of the underwriter, which in turn pushes up the cost and reduces the efficiency of the underwriter.
During pre-underwriting, the experts check and ensure that all data or documents are complete and ready for the underwriter. Pre-underwriting ensures that lenders send the best borrower’s profiles with a high chance of success to the underwriter.
Hence, the underwriter works on the best profiles resulting in less iteration and improved turnaround time.
With this action, there is optimal productivity from the underwriter.
Early Detection Of Red Flags
Discrepancies in records result in an unpleasant situation in the mortgage industry. Closing a mortgage becomes unachievable in the presence of discrepancies.
But here is the good news; pre-underwriting will help lenders uncover anomalies at the early stages of the mortgage process.
Hence lenders go further into the process with borrowers’ profiles free of anomalies.
Improves Closing Ratio And Profitability
Since pre-underwriting eliminates faulty applications and documents discrepancies at the early stage, the mortgage process moves faster.
When the process goes on faster, lenders will close loans quickly. It also influences the action of borrowers because they will be satisfied and decide to stick with the lender.
In summary, the fast mortgage process improves the lender’s closing ratio, satisfying and attracting more borrowers. When there are more borrowers, the lender experiences more profitability.
How PrivoCrop Can Help With Pre-underwriting
Pre-underwriting provides excellent benefits to lenders. However, it is a sensitive process that requires good expertise to yield the best result.
PrivoCrop has vast experience in providing pre-underwriting solutions to lenders. In addition, we have a checklist-based approach to evaluate loan files.
At PrivoCrop, we prep disclosure for Real Estate Procedure Settlement Act(RESPA), Truth In Lending Act(TILA) and carry out verifications to ensure loan files comply with standard laws.
PrivoCrop will provide;
All with the up-to-date technology and approach.