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Oct 23, 2021 | By Benie Khan
Mortgage Underwriting - How does it work?

Mortgage Underwriting - How does it work?


Taking on a mortgage is a big commitment, and one lenders don’t take lightly. All lenders must make sure you qualify for the loan you applied for, which requires mortgage underwriting or evaluating your qualifying factors.


Most people fear the underwriting process, but it’s not as bad as it seems. Here’s everything you must know about it.


What is Underwriting?


The underwriting process is an evaluation of your qualifying factors for a loan. Underwriters look at your income, assets, credit score, and any public records. They ask questions, ask for proof of any information you provide, such as income, assets, bankruptcy information, credit items, and use the information to decide if you meet specific loans guidelines.


What do Underwriters Look For?


Everyone always worries about what underwriters look for. So they assume if they have anything negative in their qualifying factors, an underwriter will decline their application.


This isn’t always the case. Overall, underwriters look at the following.


Credit Report


Underwriters review your credit report, looking at the score and your credit history. They look at your credit score to make sure it meets the loan guidelines, but they also look at your credit history. For example, do you have a lot of late payments or collections?


They look for specific details that would make you a high risk.


More on credit:


What credit score is needed to buy a house?




Underwriters need proof of your income. Usually, pay stubs covering the last most recent 30 days and W-2s for the last 2 years are good enough. If they have any questions about your income pattern or if you recently changed jobs, they may ask for more documentation.


They may also ask to see your tax returns if you are self-employed or work on commission. They do this because underwriters need to determine your income pattern to ensure you can afford the loan or see if you have any repeating patterns of having a loss of income.




Underwriters look at your assets for two reasons. First, they determine if you can afford the required down payment and closing costs. Next, they determine the liquid assets you’ll have on hand to cover your mortgage payments in the future in case of an emergency.


Assets, also known as reserves, aren’t always required, but they are an excellent way to make borrowers look stronger. 


Appraisal and Title


Underwriters review the appraisal and title of the home you’re buying to ensure it’s worth enough money to be good collateral and to ensure the house has no liens on it.


Underwriters can pre-approve you personally for the loan before you find a property. Still, they can’t clear you to close until they review the collateral to ensure it’s a reasonable risk for the lender.


Final Thoughts


Underwriting may seem overwhelming or as if it’s impossible to get through, but it’s just an evaluation of what you can afford. Knowing the loan program requirements ahead of time and preparing your qualifying factors accordingly will ensure you get through it.


Also, if you were pre-approved prior to finding a home, your loan is much more likely to come back with the loan approval.


Work closely with your loan officer to ensure you know what’s needed to qualify or what you need to work on before you have the potential of getting pre-approved.


Answer the underwriter quickly when they need documents, and be honest throughout the entire process, and it should go smoothly for you.



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