# Every rule a loan has to pass before it funds, and how Sei checks it

*Pre-close QC*

> The pre-close QC checks for Conventional, FHA, VA and HELOC loans — credit, income, assets, title, insurance, collateral — and how Sei decides each one.

**A pre-close review is five checklists run against one loan file. Most of what it catches is not a missing document. It is two documents that disagree, or one that is a week too old.**

Sei’s [Pre-Close QC Agent](/for-lenders/pre-close-qc-agent) runs the agency rule set for the loan’s program — Fannie Mae and Freddie Mac, FHA Handbook 4000.1, VA Pamphlet 26-7 — and your investor overlays on every file before it funds. Each rule ends in a verdict, the reason, the page it was read from and the line quoted off that page. This guide is that rule set written out: what is checked for each program, where the programs disagree, and how the agent gets from a file of several hundred pages to a decision a QC lead can sign.

## Five checklists, one file

The same five checklists run on every loan. The program decides which rules inside them apply, and the loan’s own facts decide the rest — a gift-funds rule on a file with no gift is marked not applicable, with the reason, rather than failed or silently skipped.

### 1. Pre-close

Eligibility and the closing package: whether this loan, on these terms, with these documents, can close.

- Every borrower signed the initial application, and nobody signed it who will not be on the Note
- The purchase contract is complete, signed by the buyers on the 1003, and agrees with the loan on price, credits and parties
- Title names the lender with its successors-and-assigns clause, vests in the borrower on a refinance, and puts the new loan in the right lien position
- Hazard and flood policies cover the subject address, the mortgagee clause and the closing date

### 2. Underwriting

The decision behind the approval: the AUS run, every condition on it, and the credit file it was scored on.

- The latest AUS submission matches the final 1003, the 1008 and the Closing Disclosure
- The credit report reference number matches the AUS run it was scored on
- Every AUS condition is cleared by a document in the file, named
- Waiting periods after a bankruptcy, foreclosure, short sale or deed-in-lieu are met from the right date

### 3. Income

Each qualifying figure, recalculated from source and documented to the rules for its own income type.

- Two years of history for base, overtime, bonus and commission, and the averaging method the guide sets
- Self-employed income from the returns and transcripts, with year-over-year decline tested
- Rental income from the Schedule E or the lease and market rent, at the guide’s vacancy factor
- Non-taxable income grossed up only as far as the program allows

### 4. Assets

Twenty-one sources of funds, each with its own documentation rules, tested for ownership, age, seasoning and sufficiency.

- Bank, brokerage and retirement statements: account holder, every page, statement age and period covered
- Gifts, gifts of equity, grants, down payment assistance and employer assistance: donor eligibility and transfer evidence
- Borrowed funds, bridge loans and the sale of personal or real property: the debt in the ratios, the proceeds evidenced
- Earnest money, large deposits, virtual currency, cash on hand and credit-card rewards, each under its own rule

### 5. Appraisal

The collateral and the report that values it, including the property standards each government program adds.

- The right report for the property type, signed, and submitted through the agency portal with a successful status
- Comparables, adjustments, zoning and highest and best use, as the appraiser supported them
- A report made subject to completion or repairs has the completion certificate behind it
- Condo and PUD project review complete for the review type used

## The file, sorted before a rule is read

Before a single rule is read, every page is split into its documents and filed into one of thirteen categories, so a finding points to a named document — not to page 412 of a PDF nobody wants to scroll.

- **Application** — Initial and final 1003, HUD and VA addenda, the 1008, declarations, the compliance events timeline
- **Credit** — Tri-merge report, supplements, refreshes, the fraud and identity report, letters of explanation
- **Income** — Paystubs, W-2s, written and verbal VOEs, tax returns and transcripts, award letters, leases
- **Assets** — Bank, brokerage and retirement statements, gift letters, transfer evidence, VODs
- **Appraisal** — The report and its addenda, photographs, sketch, completion certificate, the agency submission report
- **Title and legal** — Title commitment, closing protection letter, E&O certificate, tax certificate, survey, power of attorney
- **Property and HOA** — Project questionnaire, HOA certification, budget, master policy, CC&Rs
- **Insurance** — Hazard declarations or binder, flood certificate and policy, HO-6, mortgage insurance certificate
- **Purchase contract** — The contract, counter-offers, addenda, amendments and seller disclosures
- **Disclosures** — Loan Estimates, the disclosure timeline, homeownership counseling list, program and state disclosures
- **Closing** — Closing Disclosure, settlement statement, closing instructions, payoff statements, the Note when signed
- **AUS and conditions** — DU or LPA findings for every run, the approval, the condition list and what cleared each one
- **Agency forms** — FHA case assignment and CAIVRS, the VA COE, Notice of Value, Loan Analysis and 26-8937

## One question, three programs, three answers

A reviewer who moves between programs carries the wrong number across more often than they miss a rule. These are the questions every pre-close review asks, with the answer each agency guide gives. Overlays tighten them; none of these is an overlay.

| Check | Conventional | FHA | VA |
| --- | --- | --- | --- |
| Credit report age | No more than 120 days old on the note date, measured from the pull date | No more than 120 days old on the note date | 120 days from the note date; 180 days for new or proposed construction |
| Asset statements | Two full months on a purchase (or the latest quarter), or what the AUS specifies; no older than four months at the note date | The latest month showing the prior month-end balance, or two months; within 120 days of the note date | The latest statement on an AUS approval; within 120 days of closing |
| Earnest money | Sourced when it is counted in funds to close; never in virtual currency unless converted and held in a U.S. institution | Sourced when it exceeds 1% of the sales price, or looks large against the borrower’s savings | Sourced, or deducted from verified assets |
| Seller and interested-party contributions | Principal and second homes: 3% above 90% CLTV, 6% from 75.01–90%, 9% at 75% or below; investment property 2% | 6% of the sales price; anything over it, or any inducement, reduces the mortgage amount dollar for dollar | Concessions capped at 4% of reasonable value; normal discount points and closing costs sit outside the cap |
| Retirement funds as reserves | Vested balance net of any loan against it; liquidation evidenced when needed to close | 60% of the value, less any loan against it, with the withdrawal terms documented | 60% of the value, less any loan against it; 401(k) withdrawal terms documented |
| Stocks, bonds and mutual funds to close | No liquidation evidence needed when the value is at least 20% more than the funds required | Two months of statements; evidence of liquidation not required | The latest statement, and evidence of liquidation when used to close |
| Gift funds | Letter with the amount, donor, relationship and a no-repayment statement; a gift of equity cannot fund reserves | Donor cannot be an interested party; a gift of equity only from a family member | Cannot fund reserves; donor unaffiliated with the builder, developer, agent or any interested party |
| Collection accounts | Not required to be paid on a one-unit principal residence; on 2–4 units and second homes, paid when they total more than $5,000 | At $2,000 cumulative (medical and charge-offs excluded): paid off, on a payment plan, or 5% of the balance counted monthly | Counted at the payment on the credit report, and weighed in the analysis of credit |
| Student loans | The reported payment; if zero or deferred, 1% of the balance or a documented fully amortising payment | The reported or documented actual payment; 0.5% of the outstanding balance when that is zero | Excluded if deferred 12+ months past closing; otherwise 5% of the balance ÷ 12, unless the servicer documents a different payment |
| Waiting periods | Chapter 7: 4 years. Foreclosure: 7 years. Short sale, deed-in-lieu or mortgage charge-off: 4 years, or 2 with documented extenuating circumstances | Chapter 7: 2 years from discharge. Foreclosure, deed-in-lieu, short sale: 3 years. Chapter 13: 12 months of on-time plan payments with trustee approval | Chapter 7 and foreclosure: generally 2 years. Chapter 13: 12 months of plan payments with trustee or court approval |
| Cash back on a no-cash-out refinance | Fannie Mae: the lesser of 2% of the new loan or $2,000. Freddie Mac: the greater of 1% or $2,000 | $500, not counting a refund of the borrower’s unused escrow | IRRRL: fees and costs recouped within 36 months, shown on a comparison disclosure |
| Cash-out refinance | LTV from the eligibility matrix — 80% on a one-unit principal residence — and the guide’s seasoning | 80% of the adjusted value; owned and occupied 12 months; every payment made in the month due for 12 months | Up to 100% of reasonable value; occupancy certified; comparison certification and seasoning |
| The ratio that decides | DTI as scored by DU or LPA, against the findings’ own limits | The TOTAL Scorecard; ratio caps and compensating factors on a manual underwrite | Residual income by family size, loan amount and region; above 41% DTI it must exceed the table by 20% |
| The program’s own paper | None beyond the AUS findings, the 1008 and any mortgage insurance certificate | Case number assignment, CAIVRS authorization, HUD-92900-A, the amendatory clause and real estate certification | Certificate of Eligibility, Notice of Value, Loan Analysis (26-6393), and the 26-8937 where the COE asks for it |

## The checks, program by program

The full rule set for each program, grouped the way a pre-close checklist is. Each line is something the agent checks against the file and decides, with the page it read it from.

### Conventional

*Fannie Mae Selling Guide · Freddie Mac Seller/Servicer Guide* — Two guides that agree on most things and disagree on enough to matter. The agent reads which agency the loan is going to from the findings and applies that agency’s rule where they differ — gift-of-equity donors, IDA matching ratios, reward points, cash back on a refinance.

**Paper only this program adds:** DU or LPA findings, every run; Form 1008 transmittal; Mortgage insurance certificate above 80% LTV; Agency appraisal submission report (UCDP SSR).

#### Credit and liabilities

- The credit report is no more than 120 days old on the note date, measured from its pull date — not the print date — and a supplement or refresh resets the clock
- The report’s reference number matches the AUS run the loan was approved on, and names, addresses and SSNs match the 1003
- Mortgage history: any 60-, 90-, 120- or 150-day delinquency in the 12 months before application is tested against the findings
- Waiting periods run from the completion date of the event as the credit report or the borrower’s documents show it
- Debts excluded as paid by someone else carry 12 months of that party’s payments; a debt assigned by court order carries the order
- Lease payments are in the ratios however few months remain; 30-day accounts are covered by verified funds
- A HELOC on the subject is documented for its balance, its limit and whether it stays open
- Mortgages on other real estate are on the credit report, or documented with taxes, insurance and dues in the ratios
- The OFAC check is clear

#### Assets and funds to close

- A borrower is the named holder of every account used to qualify, and every statement is complete and legible
- An online printout or transaction history carries the institution, the account, the borrower’s name, the date and the URL it was printed from
- Statement age and coverage per the guide and the findings; brokerage and retirement accounts on the latest statement whatever the transaction
- Earnest money: if it left the account before the statement end date the balance already reflects it; if after, the cleared check or wire is in the file
- The gift letter names the amount, the donor’s name, address, phone and relationship, and says no repayment is expected; the transfer is evidenced by check and deposit slip, withdrawal and deposit, wire, or the settlement statement
- Gift of equity: eligible donor, principal residence or second home only, on the settlement statement, and never counted as reserves
- Minimum borrower contribution from the borrower’s own funds where the guide requires one
- Personal unsecured loans — signature loans, card cash advances, overdraft lines — are not a source of funds
- Funds borrowed against an asset: the payment is in the ratios, and the loan is subtracted from the asset if that asset is also counted
- Sale of a personal asset: proof of ownership, a bill of sale, a buyer who is not a party to the transaction, and an independent value when the proceeds are large against income
- Virtual currency counts only once converted to dollars and held in a U.S. institution, with ownership and the liquidation shown
- Grants, IDAs, sweat equity, employer assistance, trade equity and an agent-borrower’s earned commission each carry the agency’s own eligibility test
- Funds are sufficient for the down payment, closing costs, any debt paid to qualify, and the reserves the findings require

#### Solar panels and PACE

- Owned outright: part of the property, valued by the appraiser
- Financed with a UCC fixture filing in the land records: the debt in the DTI and in the CLTV as other debt secured by the property
- Financed but not on title: the debt in the DTI, and the panels excluded from the appraised value and the LTV
- Leased or under a power purchase agreement: the agreement is in the file, the payment is in the DTI unless the agreement is a fixed-production structure the guide exempts, the home keeps an alternate power source, and the equipment owner is responsible for damage and removal
- A PACE obligation is paid off or subordinated before closing

#### Purchase contract

- Fully executed, every page and every addendum the contract refers to, with price, seller credits and interested-party contributions that agree with the Closing Disclosure
- The seller on the contract is the vested owner on title; an entity, trust, relocation company or agent under a power of attorney is checked for authority instead
- Interested-party contributions within the limit for the occupancy and CLTV

#### Title, taxes and lien position

- The lender’s legal name with its ISAOA/ATIMA clause on the commitment and the closing protection letter
- On a refinance, title vests in the borrower
- Every lien and judgment on the commitment is paid at closing, subordinated or cleared, and the new loan will be in first position
- A subordination agreement for every lien staying open, at an amount that covers the new loan
- The settlement agent’s E&O certificate is in the file and in force
- The tax certificate’s address, county, owner and parcel number agree with title and the appraisal, and the monthly tax figure in the payment is calculated from it correctly
- Title coverage at least equal to the loan amount, effective at closing, with the endorsements the loan needs
- A survey where state practice puts one in the file

#### Insurance

- A hazard policy or binder for the subject address, effective at disbursement on a purchase and at closing on a refinance, and not about to lapse
- Coverage at least the lesser of 100% of replacement cost and the unpaid principal balance, as long as that is at least 80% of replacement cost
- A flood determination for the subject address; in a zone beginning with A or V, a flood policy with the right mortgagee, insured, address, term, premium and zone
- An HO-6 walls-in policy when the condo or attached PUD master policy does not cover the unit interior

#### Disclosures and program terms

- The homeownership counseling list, generated for the borrower’s zip code, sent within three business days of application
- A net tangible benefit worksheet where state law requires one
- Temporary buydowns within the guide’s terms; HomeReady buydowns on purchases, fixed-rate or seven- and ten-year ARMs only
- Limited cash-out and cash-out refinances inside their own eligibility rules
- The borrower certification and authorization signed by every borrower

#### Underwriting

- The last AUS submission is the one the loan closes on, and its data matches the LOS, the 1003, the 1008 and the Closing Disclosure
- Every condition on the findings is cleared by a document in the file — named, not assumed
- Mortgage insurance coverage is in the file above 80% LTV
- A non-permanent resident’s documentation is current, front and back
- Occupancy is credible: a second principal residence, a long commute or a landlord insurance policy is a question, not a pass

#### Appraisal and project

- The right report for the property — Form 1004, 1073, 1025 or 2055, or the UAD 3.6 URAR that replaces them — signed by the appraiser and any supervisor
- The agency submission report shows a successful status, submitted after the final revision of the report
- A report made subject to completion or repairs has the 1004D or completion report, with photographs
- Comparables closed within 12 months, adjustments within the guide’s net and gross limits, and the subject bracketed by the comparables
- Predominant price and age stated as whole numbers; zoning legal or legal non-conforming; present use the highest and best use
- A private road shared by several properties has a maintenance agreement; multiple parcels and accessory units meet their own rules
- Condo and attached PUD: the project review documents for the review type used, investor concentration and a budget that funds reserves

### FHA

*HUD Handbook 4000.1* — The longest checklist of the four, because the Handbook is prescriptive where the GSE guides leave room. The FHA case file adds its own paper, a scorecard that has to be re-run when facts move, and property standards the appraiser certifies to.

**Paper only this program adds:** FHA case number assignment and case query; CAIVRS authorization for every borrower; HUD-92900-A, initial and final; Amendatory clause and real estate certification; Refinance authorization on an FHA-to-FHA refinance; FHA condominium ID or single-unit approval.

#### Application and case assignment

- Every borrower signed and dated the initial 1003 and pages 1 and 2 of the initial HUD-92900-A; nobody signed who will not be on the Note
- The final HUD-92900-A carries the underwriter’s signature and an approval date on or after the last AUS run
- The 1003 shows the loan originator’s name, NMLS ID, phone and signature
- A power of attorney is used only where the Handbook allows it — a service member overseas or on an unaccompanied tour, or an incapacitated borrower under a durable POA
- The case number, assignment date, ADP code, term, amortization, program, property type, condo or PUD indicator and address on the case assignment agree with the file
- The case query shows the case active, not cancelled, and the borrower SSN validation passed
- CAIVRS returns an authorization number beginning with A for every borrower
- One FHA-insured principal residence at a time, unless the borrower meets an exception: relocation, a larger family, vacating a jointly owned home, or a non-occupying co-borrower

#### Income

- Two years of employment and income history verified directly, from paystubs and W-2s or a written VOE
- Only legally derived income, reported on the tax returns where it has to be
- Overtime, bonus, tips, commission and automobile allowance with two years of history — or at least one with justification — averaged as the Handbook sets; commission and auto allowance net of Form 2106 expenses
- Employment gaps longer than six months, and over three employers in 12 months, explained and documented
- Temporary leave: pre-leave income if the borrower returns by the first payment; current income plus surplus reserves if after
- Self-employment of two years, or one to two with prior work in the same line; a decline of more than 20% downgrades the loan to a manual underwrite
- A year-to-date profit-and-loss and balance sheet when more than a quarter has passed since the last tax year
- Non-taxable income grossed up by no more than the greater of 15% or the borrower’s tax rate
- Rental income from the subject only on a 2–4 unit, or a one-unit with an ADU — the ADU’s income capped at 30% of the total where there is no rental history
- Boarder income with two years of history on the tax returns, at the lesser of the average and the current lease
- Expected income guaranteed to start within 60 days of closing, with reserves to bridge it, and never from a family-owned business
- A borrower employed by a family business is shown not to be an owner

#### Credit

- A tri-merge report for every borrower on the Note, no more than 120 days old, with the mortgagee and the reporting agency named
- A credit freeze or fraud alert addressed; every address on the report checked for undisclosed real estate or an occupancy question
- Community property states: a credit report for the non-borrowing spouse, their debts in the ratios unless state law excludes them — with the statute noted in the file — and their judgments resolved
- Disputed derogatory accounts totalling $1,000 or more, excluding medical and identity theft, downgrade the loan to a manual underwrite
- Judgments paid, or three months of on-time payments under an agreement that keeps the FHA loan senior — payments may not be prepaid to get there
- Delinquent federal non-tax debt makes the borrower ineligible until resolved; a CAIVRS hit is verified with the creditor agency before it is relied on
- Authorized-user accounts are in the ratios unless the primary holder’s 12 months of payments are documented
- Closed-end debt paying off within 10 months is excluded only if those payments total no more than 5% of gross monthly income
- Deferred obligations, installment and revolving payments, child support and alimony, contingent liabilities and private savings clubs, each counted the way the Handbook says
- Mortgage history in the 12 months before case assignment tested against the downgrade thresholds; a modification needs six payments under its terms, and a forbearance plan ends at or before closing

#### Refinances

- Cash-out: owner-occupied principal residence only, owned and occupied for the 12 months before case assignment, six months of payments, every payment made in the month due, 80% of the adjusted value, and no income from a non-occupying co-borrower
- Rate-and-term: owner-occupied principal or HUD-approved secondary residence, 97.75% LTV and CLTV for a principal residence occupied 12 months, cash back no more than $500
- Simple refinance: FHA to FHA, 97.75% on a principal residence and 85% on a HUD-approved secondary residence
- Payoff statements for every mortgage being paid, with the interest period checked
- Short payoffs, buying out a title-holder’s equity and paying off a recorded land contract, each under its own rule
- At least one borrower held title before case assignment

#### Purchase contract

- The complete final contract, with every addendum that changes the terms or the underwriting decision; standard advisories are not required
- The buyer named on the 1003 signs the contract, and the seller is the owner of record
- The amendatory clause and real estate certification, signed by buyer, seller and agent, when the value statement was not issued before the contract
- The Informed Consumer Choice disclosure and HUD’s required homebuyer notices
- Interested-party contributions within 6% of the sales price, and inducements to purchase — furniture, vehicles, excess contributions — deducted from the mortgage amount
- Identity-of-interest transactions held to 85% LTV unless an exception applies: a family member, a builder’s employee, a corporate transfer or a tenant purchase
- A resale within 90 days of the seller’s acquisition is ineligible
- Mixed-use property at least 51% residential; a property that will keep a PACE obligation is ineligible

#### Assets and funds to close

- The borrower’s name on each statement, within 120 days of the note date, every page present, and online statements with the URL and the institution
- Recurring payments in the statement history that are not on the credit report, explained or added to the ratios
- Individual deposits above 50% of monthly effective income documented
- Gifts and gifts of equity from eligible donors; the Minimum Required Investment of 3.5% from an acceptable source
- The upfront MIP financed in full or paid in full in cash, and personal property bought separately excluded from the price
- Reserves of three months’ PITI on a 3–4 unit, and two months where ADU rental income is used
- On a 3–4 unit, PITI divided by net self-sufficiency rental income does not exceed 100%
- Cash on hand explained and reasonable for the time it was saved; sale of personal property at the lesser of the estimated value and the sale price
- Proceeds from a sale of real estate shown on the executed Closing Disclosure, from an arm’s-length sale
- Borrowed funds only from an independent third party, never an interested party; an SBA disaster loan on the subject subordinated

#### Title, insurance and the payment

- A complete preliminary title report with the legal description and a 24-month chain of title
- Lender name with ISAOA on title and the closing protection letter; exceptions addressed; liens cleared; first-lien position
- Hazard and flood policies with the mortgagee clause, borrower name, loan number and address, effective at closing, with the flood zone matching the certificate
- The monthly hazard premium and the monthly MIP in the payment match the policy and the Handbook’s premium tables for the loan amount, LTV and term
- Condos and attached PUDs: the master policy, an HO-6 where the master does not cover the interior, and fidelity coverage on the projects that need it

#### Condominium projects

- The project is on HUD’s approved list and its FHA condo ID is on the case assignment — or the unit qualifies for single-unit approval
- Single-unit approval: occupancy, delinquency and concentration within the Handbook’s limits — no more than 15% of units in arrears, and no single owner above 10% of a project of 20 or more units
- Commercial space no more than 35% of floor area, and a live/work unit no more than 49% commercial
- Control transferred to the owners, recorded documents in place, and the master, liability and fidelity coverage the project size requires
- Projects in a special flood hazard area, leasehold projects and site condominiums each under their own rule

#### Rescoring, fraud and the decision

- The loan is rescored when any data element changes, and must be when liabilities rise by more than $100 a month, reserves fall more than 10% or income falls more than 5% below what was scored
- Every party — borrowers, seller, appraiser and appraisal company, employer, loan officer, agents — checked against HUD’s Limited Denial of Participation list and the federal exclusion list
- No unresolved red flags on income, employment, assets, occupancy, SSN, documents or the contract
- Non-occupying co-borrowers held to 75% LTV, or 96.5% where they are family members and the transaction qualifies
- The underwriting decision is supported by the file the loan closes on

#### Appraisal and property standards

- The appraisal’s effective date is not before case assignment, and a new appraisal is ordered for each case number
- Neighborhood boundaries defined; zoning marked legal, legal non-conforming, none or illegal
- Homes built before 1978: every surface observed for defective paint
- Utilities on and systems operated, or the report made subject to it; contributing appliances operational
- A transfer by foreclosure to a mortgagee is not evidence of market value
- Proposed and new construction carries its inspections; runway clear zones, termite areas and water tests are handled as the Handbook sets
- The appraiser’s license and the required photographs are in the report

### VA

*VA Pamphlet 26-7 and VA circulars* — VA turns on the veteran: their eligibility, their entitlement, their funding fee and their family’s residual income. A VA review that reads like an FHA review with different forms misses the half of it that has no FHA equivalent.

**Paper only this program adds:** Certificate of Eligibility; Notice of Value; VA Loan Analysis (26-6393); Verification of VA Benefits (26-8937), where the COE calls for it; Counseling Checklist for Military Homebuyers (26-0592) for active duty; Determination of eligibility (26-1817) for a surviving spouse.

#### Eligibility and entitlement

- A valid COE, its name and SSN matching the file, and every condition printed on it satisfied
- Funding-fee status read off the COE — exempt, non-exempt, or a 26-8937 required — and a non-exempt fee calculated for the down payment and first or subsequent use
- The funding fee financed into the loan or paid in cash at closing from the veteran’s own funds
- Basic entitlement of $36,000 on loans of $144,000 or less; above that, enough entitlement for a 25% guaranty where the veteran’s entitlement is reduced
- Prior entitlement on the COE: restored after a sale and payoff, by one-time restoration, or not at all where the property went to an ex-spouse
- A surviving spouse’s eligibility determined on the 26-1817

#### Borrowers and occupancy

- The veteran whose entitlement is used is a borrower; joint loans follow VA’s rules on who may join
- The veteran will occupy within 60 days, or within a reasonable time under the certification VA allows — including a spouse or dependent child occupying for a service member
- Term no longer than 30 years and 32 days; the loan purpose is one VA guarantees
- Active duty: the counseling checklist signed, and orders for a change of duty station
- A power of attorney is a specific POA with the content VA requires, with evidence the veteran is alive and well
- Every dependent on the application, with ages, because they drive residual income

#### Credit

- The report is within 120 days of the note (180 for new construction), covers all borrowers, and reports two years of residence and employment
- Proof of the full SSN for every borrower, matching the COE and the credit report
- CAIVRS checked for every borrower; delinquent federal debt makes the borrower ineligible until current
- Undisclosed debt: 12 months of history for a mortgage the file did not disclose
- Bankruptcy, foreclosure, short sale and deed-in-lieu waiting periods, and re-established credit after them
- Community property states: the non-borrowing spouse’s debts in the analysis, with judgments and collections weighed
- Deferred student loans, installment and revolving payments, open 30-day accounts and contingent liabilities counted as VA sets; disputed accounts excluded unless reduced to judgment
- The 26-8937 checked for VA debts — overpaid education benefits, for one
- Child-care costs where young dependents are declared, and commuting costs where the commute is unusually long

#### Residual income and ratios

- Family size counts every member of the household, including a spouse not on the loan
- The residual income requirement for that family size, the loan amount band and the property’s region
- Residual income calculated the same on the Loan Analysis and the AUS, and the debts on the Loan Analysis matching the AUS
- Above 41% DTI, residual income at least 120% of the requirement, or the exception documented
- Compensating factors written up when credit or residual income is marginal

#### Purchase contract

- Every page, counter-offer and addendum; manual corrections initialed by both sides
- The VA escape clause in the contract or signed separately by the veteran and the seller
- Seller concessions within 4% of reasonable value
- A contract amended after the appraisal’s effective date has the appraiser told
- Lead-based paint disclosure on a home built before 1978; the seller on the contract is the owner on title and the appraisal

#### Assets and reserves

- Verified assets agree on the final 1003, the AUS and the Loan Analysis, with a statement for every account listed
- Liquid funds cover the veteran’s share of closing costs, prepaids and discount points
- Three months of PITI in reserves for each rental property whose income is used, and six months on a multi-unit principal residence using rental income
- Proceeds of a VA refinance never count as reserves for a rental property
- Gifts transferred and documented, never used for reserves, and never from an interested party
- Recurring withdrawals on the statements that point to an undisclosed debt

#### Title, insurance and subordinate financing

- Proposed vesting in the borrowers — a non-borrowing spouse may be added — in fee simple or an approved leasehold
- A 24-month chain of title; Schedule B-I requirements met and Schedule B-II exceptions that do not threaten first-lien position
- Tax certificate owner and parcel number agree with title and the appraisal, and the tax figure in the payment is right
- Hazard coverage effective by closing; in a special flood hazard area, flood coverage of at least the lesser of the loan balance, the insurable value and the $250,000 NFIP maximum, with the zone agreeing on the policy, the certificate and the appraisal
- A condo or attached PUD master policy covering common elements and units
- Any second mortgage subordinate to the VA loan, with no cash back to the veteran from either

#### Refinances

- Cash-out: the comparison certification, the veteran’s occupancy certification, the seasoning requirement and the stated use of proceeds
- IRRRL: a comparison of the old and new loans, and fees and costs recouped within 36 months

#### Appraisal and the Notice of Value

- The Notice of Value carries the right loan number and address, and its conditions agree with the appraisal
- Only the VA-assigned fee appraiser signs, and the appraisal was ordered after the COE
- Items that fail VA’s minimum property requirements are repaired, not left to an inspection
- Wood-destroying insect reports where required, leased equipment identified, and properties in a declared disaster area re-inspected
- New construction: completion evidence and the builder’s warranty

### HELOC and second liens

*Investor guidelines · Regulation Z* — No agency writes a home-equity guide, so most of the credit rules are the investor’s and the consumer rules are Regulation Z’s. Which of them apply depends on what the loan is — open-end or closed-end, which lien, which documentation program — so that is settled before anything else, because a first-lien rule applied to a second lien is a false finding.

**Paper only this program adds:** The current statement on every lien ahead of the new one; A title or property report suited to the lien position; The HELOC agreement or the closed-end second Note.

#### Consumer rules

- Open-end line: the Regulation Z §1026.40 application disclosures and the home-equity brochure, delivered at application
- Closed-end second: the Loan Estimate and Closing Disclosure timing, and the ability-to-repay rule
- The right of rescission where the line or loan is secured by the borrower’s principal dwelling

#### Collateral and liens

- CLTV from the current balances of every senior lien; HCLTV with the full line amount, not the amount drawn
- Every senior lien current, and its position confirmed on the title or property report
- Flood insurance where the property is in a special flood hazard area, as for any lien

#### Capacity

- The senior payment in the ratios at its actual amount from the statement, with escrowed taxes and insurance counted once
- Income documented to the program the loan was approved under — and rules for documentation that program does not use marked not applicable, with the reason

## What makes it pre-close

A pre-close review reads a file that is not finished. Some documents do not exist yet, some dates have to be sourced from somewhere else, and the file carries several versions of the same thing. These are the rules the agent applies so that an unfinished file is not read as a defective one.

- **Closing-time documents are not defects yet** — Some documents only exist once the loan closes — the final title policy, the final verbal VOE, the final Closing Disclosure. When the only gap is one of these, the finding says so and stays open for closing, instead of failing a file for being on schedule.
- **The note date, before there is a Note** — Document ages run to the note date, and before closing there is no Note. The agent tests against the scheduled closing and marks the verdict pending the executed Note — it never borrows a date that merely sits nearby.
- **The application date, from the file’s own record** — The three-business-day clocks run from the application date, so it is taken from the file’s own record of when the application was received — and the finding names where it came from.
- **The latest of everything** — A file holds three AUS runs, two credit pulls and a revised 1008. The agent reads the last AUS submission, the credit report tied to it — or the most recent one before the note date — and the latest 1008, and says which instance each verdict read.
- **The subject, not the other house** — A Closing Disclosure, settlement statement or purchase contract is used only once its property address matches the subject. A borrower selling one home and buying another has two of each in the file, and the wrong one passes every arithmetic check.
- **Overlays are rules of their own** — Investor and lender overlays are separate, named rules layered on the agency base — never edits to it — so a finding says whether it failed the guide or the overlay. Both are version-controlled and dated, so a loan is held to the rules in force for it.

## What every review promises

How the engine works is ours to keep. What it promises is yours to test, so each of these is written as something you can check on your own files.

### 1. Every page, read

Scans, phone photos, sideways pages and duplicate copies included. A file is not reviewed on the pages that happened to be legible. The [Indexing Agent](/for-lenders/indexing-agent) splits and files the same pages as a desk of its own.

### 2. Only the rules that apply

The program, the transaction and the borrower decide which rules apply. A rule that does not is marked not applicable with the reason, and no rule is skipped because a fact in the file was unclear.

### 3. Missing means missing from the file

A document is reported missing only when it is absent from the whole file — not because it sat on a page nobody looked at, and not because the scan was hard to read.

### 4. Numbers you can re-add

LTV, qualifying score, funds to close, reserves, date windows and waiting periods are calculated, not estimated, and every figure shows its inputs and the page each came from.

### 5. Conditions tied to their evidence

Every condition on the DU or LPA findings is matched to the document in the file that clears it, by name, or reported open.

### 6. A citation on every verdict

Every pass and every fail carries the page and the line quoted from it — checkboxes, signatures and form grids included, not only typed text.

### 7. Nothing cleared unverified

A verdict that contradicts its own reasoning, or a pass with no evidence behind it, is not published as it stands. What cannot be verified reaches a reviewer marked as such, and every finding carries a confidence.

## How a verdict is decided

Four verdicts. A rule that applies ends met or not met; “not sure” is not a verdict — it is a named item on a reviewer’s desk.

- **YES — Met.** The requirement is satisfied on the evidence — or the rule prohibits something and it is absent. An equivalent document counts: the UAD 3.6 URAR satisfies a rule written against Form 1004 or 1073.
- **NO — Not met.** The rule applies and the evidence contradicts it, or a document the rule requires is absent from the whole file. A missing required document is a defect, not a maybe.
- **NA — Not applicable.** The rule does not apply to this loan, property or borrower, and the finding says why in a sentence.
- **PARTIAL — For a reviewer.** Kept for the rule that applies but whose evidence cannot be settled from the file. It lands on a reviewer’s desk as a named exception, never as a pass.

**Rules of evidence**

- A document being in the file is not the rule being met. The hazard policy being present does not mean its coverage is enough.
- Not applicable and not met are different findings. Missing evidence for a rule that applies is a NO, not an NA.
- Missing is a statement about the whole file, never about the pages one check happened to read.
- Every YES and NO quotes the line it rests on, or says plainly that it rests on an absence.
- Every finding carries a confidence, and a low one goes to a person rather than into the report.

**What a finding carries · illustrative** — FHA · Credit · The credit report is no more than 120 days old at the note date: YES, confidence HIGH. Tri-merge pulled 07/14/2026; closing date on the Closing Disclosure 10/02/2026, 80 days. Executed Note not yet in the file — pending final Note date. Evidence: “Date Ordered: 07/14/2026”. Cited: Credit report p.1 · Closing Disclosure p.1.

## Run it on your own files

Send us closed files from your own pipeline — including the ones that came back as an investor finding or a repurchase demand. You will see every rule the agent ran on each, the findings with their pages, what it marked not applicable and why, and where it disagrees with the review your team signed.

- Your overlays loaded beside the agency rules, and named as yours in every finding
- Conventional, FHA, VA and HELOC files in the same run
- Findings in the shape your investor or agency already asks for

Talk to us about a QC run: /contact-us

## The desks that share the file

Pre-close QC is the last desk to read the file before it funds. The others that touch it on the way are part of the same system and read the same loan model, so a finding on one is already context on the next.

- **Pre-Close QC Agent** (/for-lenders/pre-close-qc-agent) — Pre-close quality control on every loan, with agency- and investor-ready audit trails.
- **Indexing Agent** (/for-lenders/indexing-agent) — Splits and files every page, so each rule reads the right document.
- **Income Desk** (/for-lenders/income-desk) — Recalculates the qualifying income the income checklist tests the file against.
- **Conditions Manager** (/for-lenders/conditions-manager) — Turns a pre-close NO into a condition and clears it as the evidence lands.
- **Fraud Agent** (/for-lenders/fraud-agent) — Tests every document for fabrication behind the “no red flags” rule.
- **TRID & Cure Management** (/for-lenders/trid-and-cure-management) — Runs the disclosure clocks and tolerance cures whose outcome QC checks.

## Further reading on QC and underwriting

- [Pre-Funding QC With an AI Agent: The Fannie D1-2 Review, the Defects You Catch Before the Wire, and the Reverifications the Rule Still Wants a Human to Judge](/blog/pre-funding-qc-ai-agent-fannie-d1-2-reverifications-defect-taxonomy)
- [Mortgage QC at 100% Coverage: What Changes When AI Reviews Every Loan Instead of a 10% Sample](/blog/ai-mortgage-quality-control-pre-funding-post-close-100-percent-coverage)
- [Reading the AUS Findings: Where an AI Underwriting Agent Adds Value, Where SR 11-7 Draws the Line, and Why the Model That Touches Credit Is Governed Differently](/blog/ai-underwriting-aus-findings-du-lpa-conditions-sr-11-7-model-governance)
- [The Large Deposit Question: Verifying Assets With an AI Agent Under Fannie Mae B3-4.2-02, and Where Asset Sourcing Meets the Bank Secrecy Act](/blog/verification-of-assets-large-deposit-sourcing-ai-underwriting-fannie-bsa)
- [Whose Money Is It, and Can You Prove It: Verifying Gift Funds and Down-Payment Assistance With an AI Agent Under Fannie B3-4.3-04](/blog/gift-funds-down-payment-assistance-verification-ai-underwriting-fannie-b3-4-3-04-bsa)
- [The Credit Pull Is Not One Event: Undisclosed-Debt Monitoring, the Pre-Closing Refresh, and the Permissible-Purpose Line an AI Agent Cannot Cross](/blog/fresh-credit-undisclosed-debt-monitoring-ai-mortgage-permissible-purpose-fcra)
- [The Condo Questionnaire Is Where a Clean File Stalls: Project Warrantability With an AI Agent After the Post-Surfside Rules](/blog/condo-project-warrantability-ai-agent-fannie-sel-2023-06-critical-repairs)
- [Rental Income Is Three Different Numbers and Only One of Them Qualifies the Borrower: AI on the Investment-Property Calculation](/blog/rental-investment-property-income-ai-underwriting-fannie-b3-3-1-08-75-percent)
- [The Guide Changed on Tuesday and You Have 4,000 Loans in Flight: Version-Controlling the Rules an AI Mortgage Agent Reasons Against](/blog/rulebook-change-management-agency-selling-guide-updates-ai-mortgage-effective-dates)

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_Source: [https://www.seiright.com/blog/guides/pre-close-qc](https://www.seiright.com/blog/guides/pre-close-qc) · Sei AI_