Mortgage expert David Reed invites Walletpop readers to ask him questions about real estate financing. leave your questions in the comment section of this post.
In the olden days, say before electricity maybe, mortgage applications required all sorts of documentation before the loan request was even looked at by a human being: the underwriter.
Nowadays most underwriters won't review a loan request until the loan application has been electronically submitted through either Fannie Mae's Desktop Underwriter or Freddie Mac's Loan Prospector. While this may not mean a whole lot at first glance, this method can actually save you some money for closing costs: particularly for your appraisal. That's about $400, and if you're scraping up money for a down payment that $400 can mean a lot. How can electronic approvals save on appraisal money?
When your loan officer first submits your loan request through either Fannie or Freddie's automated underwriting system, your loan decision will be returned in mere moments. This decision will list all of the documentation you'll need to provide your lender: nothing more and nothing less.
Among all the required documents is a section that addresses the value of your current or proposed property and whether or not an appraisal is even warranted. The automated decision can ask for a full appraisal, a simple "drive by" appraisal costing maybe $200, or even extend an "appraisal waiver," meaning you don't have to shell out for a new property appraisal at all.
This means that if your loan officer asks for appraisal money up front, make sure you're getting what you pay for. If an appraisal waiver is issued, your loan officer must refund your appraisal fees.Real estate finance expert David Reed is president of CD REED Mortgage Bankers in Austin, TX and author of Mortgage Confidential: What You Need to Know That Your Lender Won't Tell You and Mortgages 101: Quick Answers to over 250 Critical Questions About Your Home Loan.