The Mortgage Underwriting Process
One of the final steps in the home buying process is the mortgage underwriting process. Underwriting is when your loan is reviewed by underwriters and will be approved, approved with conditions, or denied.
What is Mortgage Underwriting?
Mortgage underwriting is the process of evaluating and determining if you qualify for the mortgage according to the lender’s guidelines. The underwriter also needs to assess your ability to repay your mortgage to evaluate risk.
What do underwriters look for?
To determine your ability to pay back your mortgage, an underwriter will look at the following items:
- Credit History (make these bold or a little bigger, so they stand out)
- Income and Employment History
- The reason you may have to submit employment documents such as pay stubs or employment verification letters is that the underwriter needs to review your income records. Understanding how much money you are earning each month helps evaluate how much debt you can handle.
- The mortgage underwriter will review your liabilities to understand your other financial responsibilities better.
- Property Value & Down Payment
- The mortgage underwriter will review the ordered appraisal to make sure that the desired loan-to-value is in-line with the property value. Additionally, he/she will review your down payment as another way to evaluate risk on the loan.
Reviewing all of these factors helps the mortgage underwriter paint a better picture of your financial situation overall.
How Long Does the Underwriting Process Take?
The mortgage underwriting process may vary according to the complexity of the loan. Some people may need to submit more documents than others as well, which may lengthen the process. This process may range from a couple of days to a couple of weeks.
GuardHill has in-house underwriting teams which allow us to close some mortgages in as little as three weeks.
What Happens After Underwriting?
Once the mortgage underwriter reviews all of your financial documents, you will get a loan decision.
Congratulations! If your mortgage is approved by underwriting, you will schedule a closing date!
– Approved with Conditions
Your loan may be approved with conditions, which means that the underwriter is ready to approve the loan but may need to verify additional documentation, such as a large deposit that needs an explanation.
If your mortgage is denied, your loan originator will work with the underwriter to understand the reasoning behind the denial. Often, the debt-to-income ratio is too high, and the loan amount needs to be slightly adjusted. Other times, the credit score may be too low for the desired loan program.