The mortgage underwriting stage happens when your loan processor submits your loan application and related documentation to the mortgage underwriter. The mortgage underwriter will make sure that your financial situation meets the guidelines of the chosen loan program, and finally help the lender make the decision to approve or deny your loan request.

The mortgage underwriter is one of the most important person in your mortgage approval process. Most of the work during this stage is in the hands of your underwriter; therefore, you need to make sure you are prepared for this process and that you are ready to succeed. There are many steps you can take to ensure a smooth underwriting process and get closer to becoming a home owner.

The Mortgage Underwriter

The mortgage underwriter’s job is to evaluate the risk of lending you money. The underwriter will ensure that your loan application and documentation are correct, and will also confirm that your finances are accurate and truthful.

Mortgage underwriting rules are currently stricter, as a result of the new requirements in the Consumer Financial Protection Bureau. The new rules require mortgage underwriters to pay extra attention to applicants’ employment and financial history, before they decide to approve a loan.

As every lender operates differently, you may find that mortgage underwriters are sometimes part of the lender’s team, and other times they are part of an independent underwriting company that handles your lender’s underwriting duties. The underwriting process could be slightly different, depending on your lender. Make sure you contact your loan originator if you have any questions regarding how to contact your mortgage underwriter.

Mortgage Underwriting Considerations

To evaluate the risk involved in lending money, mortgage underwriters usually refer to the “Three Cs” of loan underwriting:

1. Credit: One of the most important factors in loan processing is your credit reputation. The underwriter will review your credit report to verify how and when you pay your bills, and will also predict how likely you are to make your mortgage payments on time.
2. Capacity: Another important factor is your capacity to repay a loan. The underwriter will evaluate your employment history, all your income sources, all your debt, and will probably request supporting documentation for self-employed applicants. Verification of your checking, savings, and retirement accounts will also be part of the assessment. The underwriter will look at your debt-to-income ratio and financial stability to make sure you are comfortable paying your current obligations plus your new monthly mortgage payment.
3. Collateral: Before approving a loan, the underwriter must determine the value of the property to ensure that the loan amount is less than, or equal to the actual value of the property. This will help the lender recover the loan amount in case a borrower fails to pay the loan. The underwriter will order an appraisal to obtain an estimate of the home’s market value.

It is also possible that the underwriter will evaluate the type of property you are buying, since different types of properties involve different risks. Lenders consider for example, that a borrower may walk away from an investment property in a difficult financial situation, but will more likely try to save their primary residency in the same difficult situation.

Be Prepared for the Underwriting Process

While the underwriter has the power to approve or decline your loan application, there are things you can do to ensure a speedy underwriting process.

Watch Your Credit Score

Lenders will usually check your credit twice during the loan processing: when you first apply for a loan, and then just prior to closing. Make sure that your credit score is at its best during the entire process, and that means paying your bills on time, keeping low balances on your credit cards, maintaining your current job, and being conservative in your expenses. Until you close your loan, ensure that changes in your credit report do not hurt your chances in getting a loan.

Be Ready to Comply Quickly to Additional Inquiries

During the underwriting process, your mortgage underwriter reviews, investigates, and confirms the accuracy of your loan application and documentation, and in some instances may contact you to request additional financial documents or other proof of income. Make sure you respond to all requests as quickly as possible to ensure your application moves faster to the closing process.

Be a Hands-On Borrower

As your mortgage underwriter works on your application, you can stay ahead of the process by alerting your employer, bank, or other financial institution that they may be contacted to provide information. It is also a good idea to keep in touch with your lender to find out the status of your application, if there is any additional documentation needed, or any unexpected delays. Make sure you keep track of your conversations, the documents you provide, and the dates those are submitted.

Work with Your Underwriter

While you wait to move to your dream home, the underwriting process could be at times overwhelming. Make sure you are prepared, all paperwork is accurate, and that you will actively respond to any request. Your mortgage underwriter will be happy to know that you cooperate in a timely manner. Our ACG Funding Loan Officers are always available to answer any question you may have during the underwriting process.