What Is Mortgage Underwriting?

Your home is very likely the most expensive item you will ever buy (or finance) so it's no wonder that the process can be arduous and painstaking. You cannot expect a lender to provide money for the purchase of a home without them making sure that you can fulfill their expectations of paying it back. The underwriting process can produce quite a bit of nail-biting on the part of borrowers, and it can seem to some as if their loan has dropped into a black hole of uncertainty. To reduce the stress, read on to find out what the mortgage underwriting process involves.

What is the Lender Looking For?

While every financial institution is unique, most often lenders look at similar sets of criteria. For example, conventional loan lenders may be interested in your down payment, but government-backed loan lenders may pay more attention to your debt-to-income ratios. The underwriting process means taking a closer look at the borrower and verifies all the information as stated on the loan application. In most cases, that means reviewing and double-checking your income, debts, down payment, and more.

The Underwriting Process in a Nutshell

Application and documentation – Once you've had your offer accepted and form an agreement with the seller, it's time to fill out a loan application. You have probably been working with a loan representative, but underwriting is performed behind the scenes. In all likelihood, you will only be communicating with your underwriter by phone (if at all). Along with the application, you will be asked to supply documentation that proves your income, bank balances, employment, and more. The more requests you can fulfill quickly, the faster your approval process will be. Often, borrowers are asked to show:

• Bank statements
• Tax returns
• Pay statements

A credit check is performed – The first of many credit checks is performed. You can expect your credit and financial situation to be checked right on up to the closing, so be sure you don't apply for any other loans, use your credit cards, take large sums out of the bank, etc.

Debt-to-income ratio is determined – Getting approved for a mortgage is about more than income. You must show that all of your other debts can be paid when you add the mortgage onto your budget.

Employment checked – You can expect the underwriter to confirm how many years you have worked at your place of employment and your income.

To learn more about the underwriting process, speak to your lender.

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