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What is a Mortgage Underwriter

Are you thinking about buying a home? This is an exciting process for most people, but financing is difficult for some. However, mortgages make buying a home possible. Once you’ve found the perfect place to buy, the mortgage process begins. The first step when applying for a mortgage is the underwriting process. What is a mortgage underwriter? We take a look at the full process and guidelines below.


What is Mortgage Underwriting?

What is underwriting? The term is believed to have been coined by the famed insurer Lloyd’s of London, which would accept some of an event’s risk in exchange for a premium.

In today’s banking terms, the underwriting process simply means that your lender will verify your income and assets, and assess your debts to issue final approval of your mortgage. The process involves an institution or individual taking on financial risk, which typically involves loans, insurance, or even investments at a fee.


How Long Does Underwriting Take?

The time underwriting takes is different as every mortgage is unique. Typically the loan underwriting process takes over a week to complete. However, you can make the whole process a lot easier for yourself by promptly handing over the necessary document. It also ensures that the process remains smooth.

What does underwriting mean for your mortgage? If the assessment determines that the lender will be undertaking too much risk, the bank will deny you the loan. But, if you fulfill all or most of the requirements, you have crossed what is probably the biggest hurdle to getting the money for your home.


What Do Underwriters Do?

A mortgage underwriter looks at your mortgage application keenly and calculates the risk assessment matching it to your application. Your ability to pay is based on an analysis of credit, capacity to repay, and collateral. However, a weakness in either of the three can be offset by the other. The loan underwriter will also work with you directly, helping you submit the required documentation.

To be precise, this is done to ensure that you undertake a mortgage that you can repay. Underwriters use specific guidelines and computer programs that check the level of risk in a client’s mortgage loan.

Some of the tasks that you will expect underwriters to undertake include:

  • Reviewing your credit history. A mortgage loan underwriter will look at your overall credit score focusing on bankruptcy, delayed payments, and credit overuse.
  • Conducting an appraisal to ensure that your home’s value matches the credit offered by the lender.
  • Reviewing mortgage applications. Mortgage underwriters will ensure that the application is filled out in totality and that all supporting documents are availed.
  • Loan analysis. A careful analysis of the loan is done using loan-to-value (LTV) and debt-to-income (DTI) ratios from the information availed in the application and supporting documents. Where the application meets the set guidelines, the mortgage underwriter will approve the loan and specify closing conditions.

As you wait for your mortgage loan to be approved, your future home will also undergo an appraisal.


What Does a Mortgage Underwriter Look For?

Two main factors go into consideration for your underwriter to determine whether you will be approved for your mortgage. These are:

  • Credit: The underwriter will evaluate how you are currently handling debt and your history. This information will be obtained from the credit reports and includes your credit score, whether you have paid credit cards and car loans on time, or had repossessions of property.
  • Ability to Repay the Loan: A mortgage underwriter will also look at your ability to repay from your application and credit reports. For instance, if you are self-employed, this poses a higher risk to the lender, unlike when you are employed and earning a salary or wage due to income stability.


Tips to Improve Your Underwriting Experience

The underwriting process may be nerve-wracking, but here are a few tips that will help streamline the process of loan underwriting:

  • Ensure you have all documentation needed and submit them with your application on time.
  • Always make sure you provide supporting information rather than leave the underwriter with questions.
  • Be completely honest up front. For instance, disclose if you have credit issues as the underwriters will look for red flags to find out the truth.
  • Avoid applying for other kinds of credit during the evaluation stage as this can affect your credit score, which is key in the underwriting process.
  • Be prompt while responding to inquiries from your underwriter as this will help ensure you meet all conditions.
  • Make sure you regularly keep in touch with your underwriter. This lets the underwriter know that you are invested in the process and approval of the loan.


Get Help With CreditAssociates

Getting a mortgage when you’re struggling to make loan payments can be a major red flag for any lender. If debt is getting in the way of your mortgage-application process, it may be time to get some professional financial support. CreditAssociates’ debt relief programs can help. Contact us today to learn how we can help you get closer to owning your dream home.