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Phase B: Pre-qualification/Pre-approval

Phase B: Pre-qualification/Pre-approval SIPOC Workflow Diagram

SIPOC Workflow Components

Suppliers (Received from)

  • Credit Reporting Agencies
  • Employers
  • Financial Institutions
  • Borrowers

Inputs (Information)

  • Credit Reports
  • Pay Stubs
  • Bank Statements
  • Tax Returns

Process (Activities)

Outputs (Created)

  • Pre-qualification Letter
  • Initial Risk Assessment

Co-Workers (Handed-off To)

  • Loan Officers
  • Underwriters

Systems Interaction Summary

Credit Check Process in Encompass

  • 1. Access the Loan File
    • Log into Encompass LOS using your credentials
    • Open the specific loan file for the borrower
  • 2. Verify Borrower Information
    • Navigate to the 1003 Application Form and verify:
      • Full Name
      • Social Security Number (SSN)
      • Date of Birth (DOB)
      • Current Address
    • If applicable, verify co-borrower information
  • 3. Credit Report Process
    • Credit Vendor Selection:
      • Choose integrated credit reporting vendor
      • Select report type (Single-bureau or Tri-merge)
      • Specify prequalification purpose
    • Borrower Consent:
      • Ensure documented borrower consent
      • Send Credit Authorization Form if needed
  • 4. Credit Analysis
    • Review Key Components:
      • Credit Scores (FICO scores)
      • Payment History
      • Derogatory Items
      • Debt-to-Income (DTI) Ratio
  • 5. Documentation & Next Steps
    • Import liabilities into loan file
    • Save credit report to eFolder
    • Document findings in Loan File Notes
    • Proceed to next workflow step or address any issues

DTI Calculation Process in Encompass

  • 1. Access the Borrower's Loan File
    • Log into Encompass LOS using your credentials
    • Open the specific loan file for the borrower
  • 2. Gather Borrower Information
    • Navigate to the 1003 Application Form sections:
      • Monthly Income: Include all sources of gross income
      • Monthly Debts:
        • Mortgage payments (new and existing)
        • Car loans or leases
        • Credit card minimum payments
        • Student loans
        • Child support or alimony
  • 3. Calculate Monthly Housing Payment
    • Estimate PITI:
      • Principal and Interest
      • Taxes and Insurance
      • HOA Dues (if applicable)
  • 4. Enter Data into Encompass
    • Income Section:
      • Input borrower's gross monthly income
    • Liabilities Section:
      • Input borrower debts
      • Import liabilities from credit report
      • Assign appropriate Monthly Payment amounts
  • 5. Run Encompass Calculations
    • Navigate to Loan Summary/Qualifying Ratios section
    • Verify Front-End DTI (Housing Ratio):
      • Monthly Housing Payment ÷ Gross Monthly Income × 100
    • Verify Back-End DTI (Total DTI):
      • Total Monthly Debts ÷ Gross Monthly Income × 100
  • 6. Verify Compliance with Guidelines
    • Compare DTI ratios against program limits:
      • Conventional Loans: Back-end DTI up to 45%
      • FHA Loans: Front-end 31%, Back-end 43%
      • VA Loans: Focus on residual income
      • USDA Loans: Front-end 29%, Back-end 41%
  • 7. Document and Save
    • Save DTI ratios in loan file
    • Add notes summarizing:
      • Income and debt details used
      • Any adjustments made
      • Program requirement compliance

Loan Amount Estimation Process in Encompass

  • 1. Access the Borrower's Loan File
    • Log into Encompass LOS using your credentials
    • Open the loan file for the borrower
  • 2. Gather Borrower Information
    • Navigate to the 1003 Application Form and verify:
      • Income: Employment details and monthly gross income
      • Assets: Bank accounts and investment accounts
      • Debts: Monthly obligations and payments
      • Credit Score: Verify eligibility for programs
  • 3. Identify Loan Program Requirements
    • Check program guidelines (FHA, VA, Conventional, USDA) for:
      • Debt-to-Income (DTI) Ratio Limits
      • Loan-to-Value (LTV) Ratio requirements
      • Required reserves
      • Down payment requirements
  • 4. Calculate DTI and Purchasing Power
    • Use Loan Calculator tool in Encompass:
      • Enter gross monthly income
      • Input DTI limits for the program
      • Include monthly liabilities
      • Calculate maximum qualifying amount
  • 5. Verify LTV and Assets
    • Confirm borrower assets cover:
      • Required down payment
      • Closing costs
      • Required reserves
    • Calculate final loan amount using LTV formula
  • 6. Run Automated Underwriting
    • Submit to AUS via Encompass:
      • Use Fannie Mae's DU or Freddie Mac's LPA
      • Review findings for maximum loan amount
      • Verify compliance with guidelines
  • 7. Document and Save
    • Update Loan Summary with:
      • Estimated loan amount
      • Rate and terms
      • Calculation methodology
      • Key assumptions made

Pre-qualification Letter Generation Process in Encompass

  • 1. Access the Borrower's Loan File
    • Log into Encompass LOS using your credentials
    • Open the specific loan file for the borrower
  • 2. Verify Borrower Information
    • Navigate to the 1003 Application Form and verify:
      • Income: Gross monthly income from all sources
      • Assets: Bank accounts, savings, and liquid assets
      • Liabilities: Monthly obligations (car loans, credit cards, etc.)
      • Credit Score: Review credit report findings
  • 3. Perform Preliminary Loan Calculations
    • Calculate Debt-to-Income (DTI) Ratio:
      • Verify DTI meets loan program guidelines
    • Determine Loan-to-Value (LTV) Ratio:
      • Check property value and down payment
      • Confirm LTV meets program requirements
    • Verify Loan Program Eligibility:
      • Confirm qualification for chosen program (FHA, VA, Conventional, USDA)
  • 4. Navigate to Pre-Qualification Letter Feature
    • Locate the Pre-Qualification Letter option:
      • Access Forms and Docs tab or Loan Summary
      • Open Pre-Qualification Letter Generator
  • 5. Customize the Pre-Qualification Letter
    • Input necessary information:
      • Maximum loan amount qualified for
      • Interest rate estimate (if applicable)
      • Property address (use "TBD" if not identified)
      • Expiration date (typically 30-90 days)
      • Additional organization-specific details
  • 6. Review and Approve
    • Verify letter accuracy
    • Ensure compliance with standards
    • Obtain required approvals
  • 7. Generate and Save
    • Click Generate button
    • Save to eFolder/Documents section
    • Document in Loan Notes:
      • Loan amount and terms
      • Conditions or assumptions
      • Next steps in the process

Status Communication Process in Encompass

  • 1. Verify Pre-Qualification Results
    • Review Pre-Qualification Details:
      • Loan amount
      • Estimated interest rate
      • Loan program
      • Conditions (e.g., subject to property appraisal)
    • Check for Approval:
      • Confirm all necessary parties have reviewed results
  • 2. Update Pre-Qualification Status in Encompass
    • Navigate to loan file and update status:
      • Pre-Qualified: Borrower meets requirements
      • Not Pre-Qualified: Borrower does not meet criteria
      • Conditional Pre-Qualification: Subject to conditions
    • Save updated status in loan file
  • 3. Prepare Communication Materials
    • For Pre-Qualified Borrowers:
      • Create Pre-Qualification Letter
      • Include loan amount, terms, and conditions
      • Save letter in eFolder
    • For Not Pre-Qualified Borrowers:
      • Prepare summary of reasons
      • Document potential next steps
  • 4. Communicate with the Borrower
    • Choose Communication Method:
      • Email: Send via secure email
      • Consumer Connect Portal: Upload to borrower's portal
      • Phone: Call to discuss status
      • In-Person: Schedule meeting if required
    • What to Communicate:
      • Pre-Qualified Status:
        • Loan amount and terms
        • Conditions or assumptions
        • Next steps in process
      • Not Pre-Qualified Status:
        • Reasons for not meeting requirements
        • Recommendations for improving eligibility
  • 5. Document the Communication
    • Add notes in Loan Notes section:
      • Date and time of communication
      • Method of communication used
      • Summary of discussion
      • Attach related documents
  • 6. Follow Up Actions
    • For Pre-Qualified Borrowers:
      • Assist with next steps
      • Guide through loan application process
    • For Not Pre-Qualified Borrowers:
      • Schedule follow-up after issues addressed
      • Send reminders through Encompass

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