Underwriting is the last step of the loan application process where a risk-evaluation expert — called an underwriter — determines whether or not the borrower qualifies for a mortgage.
When you take out a mortgage loan to buy a house, you have to jump through a lot of hoops — which makes sense, since you’re asking to borrow a large sum of money. One of the steps in the approval process is underwriting.
Mortgage underwriting is when the lender checks out your financials so they can decide whether or not to extend the loan. Someone called a mortgage underwriter will take your assets, debt, income, and other key details from your application into account. Completing the underwriting process can take less time when you provide all the right documentation and details the lender asks for.
The mortgage loan underwriting process involves the mortgage lender evaluating the borrower’s financial health and ability to repay the loan before they issue final approval.
Mortgage underwriting revolves around the following information:
The underwriting process takes place after you make your down payment, but before you can officially close on the home. The timeline can be tight at this point as you may have a set closing date, move out date, or move in date you’re trying to meet, so you want things to run smoothly and quickly.
How long the mortgage underwriting process takes can vary depending on both the borrower and the lender involved. It can take as little as two or three days to get through the underwriting process or more than a week depending on your financial situation and the paperwork you provided. (For example, your mortgage lender will have to request and process more documents if you change jobs while buying a house without telling them.)
If the borrower can get the lender all of the necessary information quickly, then the underwriter can move things along a lot faster.
However, if you have to keep going back and forth to get the lender all the documents they need, then the process can take longer. Try to check everything off your list and give it to the underwriter all at once.
A mortgage underwriter is in charge of closely reviewing an applicant's finances and determining how much risk they pose to the lender in regards to repayment. They will scrutinize an applicant’s credit history, income and employment, evaluate DTI, and confirms that the applicant has enough saved to pay closing costs.
Mortgage underwriters may work with the loan officer, who is most likely the one talking directly with the borrower and guiding them through the process. They'll let the applicant know if the underwriter requests any additional personal details or documents to give a complete picture of their financial situation.
The underwriter can decide to approve the loan — or deny it if they have reason to worry the borrower can’t make their mortgage payments.
When it comes to paying for underwriting services, the borrower (aka the homebuyer) is the one who pays the underwriting fee, which is usually part of the loan origination fee.
To better understand what underwriters do, it helps to know how to become a mortgage underwriter. You generally need a bachelor’s degree (though it's not required by all employers), and while there are no specific major requirements for an underwriting career, it helps to have experience in finance, math, business, and economics.
There are also professional certifications that underwriters can pursue to increase their knowledge and experience, including:
If all goes well, you can complete the underwriting process in as little as 48 hours. As mentioned, how quickly the underwriting process is completed depends a lot on how well you prepare for it. Let’s look at a few ways you can make this experience as stress-free and efficient as possible.
The underwriting process can be tedious, but it’s one of the most important and final steps you’ll take towards homeownership. Knowing what to expect from the process and how to prepare for it can make all the difference.
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