Underwriting Process

Pre-approval Underwriting
Generally, a pre-approval contains all of the conditions necessary to have a loan approved for closing. A North Penn Financial Loan Request Form, completed 1003 and a tri-merged credit report are required in order to be submitted to underwriting for pre-approval.

Debt Ratio (DTI) - The maximum allowable Debt Ratio (Debt to Income) for a Full Documentation Loan is 45%. If the borrowing entity has greater then 6 month in reserves of future mortgage payments on the subject property the Debt Ratio can be increased 1 percentage point (1%) for ever month of reserves greater then the initial 6 months to a maximum allowable ratio of 60%. For loans on investor properties the DTI can be waived completely if the property has a Debt Service Coverage Ratio greater then 120%. The maximum Debt Ratio cannot be waived on any owner occupied property.

The maximum allowable Debt Ratio (Debt to Income) for a Stated Loans Income/Stated Asset Loan is 55%. The maximum debt ratio is waived for investor loans with credit scores of 620 or above or where the LTV is 50% or less. The maximum debt cannot be waived on any owner occupied property.

Income - All North Penn Financial programs that are listed as stated income loans must have the income stated by the applicant and included in section VZ of the 1003 mortgage application or corresponding section of the North Penn Financial Loan Submission Form. No application can be considered complete with this section left blank. No North Penn Financial employee is allowed to complete this section of the 1003 Mortgage Application or North Penn Financial Loan Submission Form for any reason. North Penn Financial does not verify an applicant's income and relies solely on the applicant's statements contained in the 1003 application.

Credit - North Penn Financial utilizes the middle of three credit scores or the lower of 2 credit scores of the primary borrower. The primary borrower is the applicant stating the highest monthly income on the 1003. North Penn Financial utilizes the credit report submitted by the broker to price and grade the loan for pre-approval. All loans are subject to a credit report ordered by North Penn Financial prior to closing. Any change in the applicant's credit status as determined by a change in the credit score may cause the loan to be re-priced and the LTV lowered. The loan may also be denied for a serious deterioration of credit quality.

Assets – North Penn Financial does not verify an applicant's assets unless the circumstances of the loan, in the judgment of the underwriter, warrant verification of assets. Applications should have sufficient assets to complete the transaction requested in the application.

Employment - North Penn Financial does a verbal verification of employment prior to closing. All self-employed borrowers must have a verifiable business in existence at the time of closing.

Licenses – North Penn Financial requires all commercial borrowers and self-employed borrowers to submit copies of current business licenses. Special licenses for automotive properties are required, as well as, properties containing underground tanks.

Verification of Mortgage - Verification of mortgage payment history is required in instances where the mortgage is not reported in the tri-merged credit report. In these instances North Penn Financial requires 12 months cancelled checks, bank statements or, if applicable, a completed verification of mortgage.

Verification of Rent - Verification of rent may be required based on credit history and loan circumstances. The form of verification must be 12 months cancelled checks. A rental verification form can only be utilized in instances where a management company or institution is collecting the rents.

Rent Rolls - Rent rolls are required on all properties of 5 or more residential units and commercial property that is not 100% owner occupied.

Surveys - North Penn Financial does not require surveys unless the title underwriter will not remove the survey exception on the title report without a survey.

Title Insurance - North Penn Financial reserves the right to accept the title insurer. Title insurer must generally be approved and in good standing with Fannie Mae and Freddie Mac.