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.

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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.

What happens during mortgage underwriting? 

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: 

  • Income: You will provide proof of your income, like bank statements, recent pay stubs, W-2s, or other tax forms from recent years to help establish how much you earn. If you’re self-employed you’ll have to provide other documentation in lieu of a W-2 such as profit and loss sheets and your business tax return. The underwriter will also verify that the income you report is accurate by double checking with your employer.
  • Assets: The lender also takes a borrower’s assets into account when approving a mortgage loan because if the borrower has a large amount of assets (like real estate, stocks, or savings), the lender can rest a bit easier knowing they can sell those assets if they need more cash on hand to make mortgage payments. 
  • Debt: How much you earn will be compared against how much you owe, including if you owe taxes. If you have too much debt, you may want to try lowering your debt-to-income ratio (DTI); lenders typically look for 43% or less.
  • Credit history: Your credit score is also taken into account to get an idea of how creditworthy you are and how likely you are to make your loan payments on time. Different types of loans have different credit score requirements, but generally the higher your credit score is, the easier it is to qualify for larger loan amounts and lower interest rates. (The lower your interest rate is, the less you’ll pay over the life of the mortgage loan.) 
  • Appraisal: When you take out a mortgage loan you have to get an appraisal to find out what the home is actually worth. A mortgage lender won’t issue a loan if it’s for more than what the value of the house is, as it puts their interests at risk. If you default on your loan and the house is worth less than the loan, then the bank won’t be able to break even after they repossess and sell it. (All hope isn’t lost here, you can appeal a home appraisal if it comes in too low.) 

How long does mortgage underwriting take?

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. 

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. 

What does an underwriter do? 

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

How to become a mortgage underwriter

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: 

  • Chartered Life Underwriter (CLU) 
  • Chartered Property Casualty Underwriter (CPCU)
  • Associate in Commercial Underwriting (ACU) certifications.

How to make the underwriting process go smoothly

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. 

  • Don’t lie: The underwriter will do their own independent research to confirm what your credit score, assets, and income look like so lying or hiding information won’t do you any good and will just waste time. You’re better off explaining any marks on your financial history up front. 
  • Communicate quickly and thoroughly: No matter how hard you try to prepare for the underwriting process and to stay organized, chances are something will fall through the cracks, or the underwriter will need clarification on something. Be as responsive as possible during this time — the faster you reply with the updated information and documentation, the less time underwriting will take. 
  • Pause applying for new lines of credit: Because taking on new debt can affect your DTI, if you take out a car loan or finance large purchases in the midst of the underwriting process, it can throw things off course since the underwriter will then need to reevaluate your finances. The same goes for selling off your assets — don’t touch them until the lender finalizes your new mortgage loan.

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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