Do different banks need different underwriting documents?

The simple answer is YES!

Different banks and lenders may have different underwriting guidelines. This is often referred to as an underwriting “overlay”. Fannie Mae, Freddie Mac, FHA, VA and USDA all have their own underwriting guidelines that need to be followed when a lender is originating a mortgage for any of these programs.

In addition to the basic underwriting guidelines, banks or lenders may layer more guidelines or requirements on top of those issued by the Fannie/Freddie (conforming), FHA, VA or USDA. The overlays could be as simple as a minimum credit score requirement that’s higher than what would be required with the basic guidelines. Some homeowners wanting to refinance utilizing the HARP program have probably experienced this if they have existing pmi (private mortgage insurance for loans greater than 80% loan to value) – some lenders will accept this and some won’t.

There is also human underwriter who reviews your loan and who may require additional documentation. The guidelines are subject to the underwriters interpretation as well and how they view your loan application.

There are other potential issues besides underwriting overlays. It’s possible that the mortgage originator who seems to have easier underwriting guidelines than another may either not be fully aware of their underwriting guidelines and could be just trying to land this borrowers loan. You may discover after your loan has been submitted to underwriting, that you may still need to provide additional information.

An interest rate difference may have nothing to do with the difference in guidelines. However “back in the day” of reduced doc loans, interest rates tend to be higher based on the risk involved for the lender.

Ask the lender who’s says they will only require minimal documentation if they can confirm that with their underwriter. Do the mortgage originators have direct access to the underwriters? And be prepared to provide bank statements along with documentation for large deposits (this is a pretty standard guideline), or any other unusual transactions or items on your application.

If you find that you’re not getting the answer you’re looking for, ask the lender if the guideline is Fannie/Freddie (etc) or an “overlay” from the bank/lender. If it’s an overlay, you might be able to find another lender without the overlay.

Don’t be shy to ask questions or shop around for a loan.