Understanding the underwriting process for financing a condo: A checklist

There are many steps to complete to finalize the loan for the condo you're buying.

The underwriting process is triggered when the seller accepts your offer. During that process, a lender will do a deep dive to verify and recheck the documents establishing your capability to purchase the condo. It's important to notify a lender as soon as possible so the process can start and the closing isn't delayed.

You’ll need to update your financial documents and wait while the lender reviews them. Your lender also will get an appraisal of your condo. The offer-to-closing time is usually 30- to 60 days.

Here's a checklist to keep you on track:

Gather financial documents for underwriting

A deeper final dive into your finances and credit is done to verify that you have the assets to close on a home and make the monthly payments. This should be easier the second time around, now that you know what documents a lender will need and where to find them:

Bank statements
Updated pay stubs
New W-2, if applicable
New tax returns, if applicable
Updated statements from investment accounts
Copy of signed purchase agreement
Proof and verification of any other assets you have
Proof you haven’t taken additional debt
A gift letter if you're receiving funds from family or friends to indicate the money isn't borrowed
Proof that you have paid your rent on time for the past 12 months (bank statements or letter from landlord). Rental payments are not included on credit reports unless you miss a payment.
Proof that you have cash reserves to afford emergency repairs, if necessary

Lock interest rate

A lot of time can pass between making an offer and closing on a home. You want to lock in a low interest rate for your mortgage in the meantime, especially if rates seem to be rising. A small increase in rates will add up over the life of the loan.

Ask the lender if it's possible to lock in your interest rate
Find out how long a lock will last before it expires
Find out whether the lender charges for the lock and how much
Consider buying a "float down," which will lower your interest rate if rates decrease
Ask the lender about the cost of extending a lock if you have not closed by the expiration date

Get title work completed

Either you or the seller would hire the title company — the decision depends on what is negotiated between the two of you and local requirements. A title company will need to review the chain of ownership to a property as far back as state law or the lender requests to make sure that there are no overlooked liens. Here's what you should do if you're hiring the title company:

Ask your real estate agent to recommend a title company
Verify the company's credentials and reputation by doing an online search
Follow up with the title company once the report is ordered to keep track of it
Check for the costs of getting a title insurance policy for the lender
Check for the costs of getting a title insurance policy for yourself
Consult with a lawyer if the title report turns up any issues such as back tax liens
Ask seller to resolve any liens that are on the property

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