After my post last week on letters of explanation, which I explained are a common stipulation for a mortgage, I was surprised by the feedback from some readers of my blog who asked, “What is a stipulation?” And while I explain the mortgage process in detail to my clients, I realized that if you are a first time home buyer and have not yet spoken with me or another qualified loan officer, this is an important concept that you might not have yet heard about.

A stipulation is basically a request for either more information about something which the underwriter is uncertain about or a request to verify something in the mortgage application. I always tell my clients not to take it personally when stipulations arise; there are stipulations for every mortgage, and the underwriters are not questioning you. Underwriters have a legal obligation to verify any information in the loan application, including information relating to income, owned real estate, employment, assets, personal information, credit history, retirement, and self employment. So any information on a loan application relating to any of those things will need to be verified in some way, which the underwriter will determine. Those verification are called stipulations.

As an example, a client of mine closed on a house two weeks ago in Northville, and had some issues with verifying assets he held in a foreign bank. To verify assets, an underwriter will usually ask for a bank statement where the money is. Unfortunately, my client was originally from a northern European country, and his statement was not in English. I sent the statement in, but the underwriter needed the statement translated. The client was upset, and took it personally, as the amount on deposit could clearly be seen, as it was a number at the end of the statement. Further, the deposits and withdrawals were also easily discernible. But the underwriter has a legal obligation to verify the information, and needed to be sure we were using the correct currency, and that it was, in fact, a statement of assets, and not a loan or something else.

After explaining to the client why we needed it translated, and that it was a legal responsibility, he pointed me in the direction of a translator he knows who was able to translate the documents for us. With the documents translated, we were able to set a closing date and get him into his new home.

If you are considering buying a house and have some questions about what kinds of things might be stipulated in your mortgage, or what kind of documentation to have ready, please contact me and I will get you started. If you have anything to add about mortgage stipulations, please leave a comment.