When going through the mortgage approval process, one aspect you need to keep in mind is underwriting. Once you've been pre-approved for a loan, your application moves from the desk of your loan officer to the mortgage underwriter who will further investigate your financial profile to make sure it matches your lender’s guidelines and loan criteria. The underwriting process plays a huge role in whether your loan request will be approved or denied.
WHAT IS MORTGAGE UNDERWRITING?
Mortgage underwriting, or Real Estate underwriting, is the process in which mortgage lenders verify your assets and credit-worthiness to get a home loan. All loans go through this step before the lender can give you the funds for a mortgage. It can be as quick as two to three days, but typically takes over a week to finish and happens right before closing.
Mortgage underwriting standards have become more heavily regulated because of additional requirements enacted by the Consumer Financial Protection Bureau (CFPB) after the 2008 housing market crash.
WHAT IS THE JOB OF A MORTGAGE UNDERWRITER?
The underwriter plays a huge role in whether or not you can get the mortgage for your dream home. Some of the underwriter's responsibilities include:
HOW MORTGAGE UNDERWRITERS ASSESS A BORROWER'S RISK
The 3C’s of underwriting include:
Underwriters assess your risk by typically reviewing your documentation and paperwork, such as tax returns, W-2s, bank statements, asset statements, pay stubs, savings, IRA accounts, and other basic documents. They may also request specific documents depending on the type of loan you're getting. If you are self-employed, you may also need to provide more detailed documentation of your income and work status.
Underwriters will also pay attention to your debt-to-income (DTI) ratio to make sure you have enough money to cover your current financial obligations even if you’ll take on a mortgage.
Your credit score is one of the most important factors in your mortgage loan approval. You need to have a solid credit history to show that aside from being financially capable you're also a responsible borrower. Since your credit score is important, the underwriter will look closely at your credit report to see how you have handled past bills and credit, such as credit card payments, car loans, or student loans.
In addition, the underwriter will review the type of property you are looking to buy, its value, and how the property is used. Different types of properties carry different risks, especially when it comes to investment properties. So the lender needs to make sure that the loan amount meets the loan-to-value requirements of the product. He or she will typically order a home appraisal to determine the objective value of the home.
While the mortgage underwriting process can vary according to lenders and the institution they belong to, all lenders will most likely involve these three C's when assessing your risk as a potential borrower. Understanding these factors can help you understand what to expect with the process for you to have a better chance of getting a mortgage.
COMMON REASONS WHY UNDERWRITING IS DENIED
Underwriting takes place behind closed doors. If your underwriting is rejected your loan officer or mortgage broker will relay any requests for additional documents or further explanations. You can provide the additional documents to get your loan process back on track, such as an explanation for a recent huge bank deposit or withdrawal, or further documents to verify your income and employment.
However, if your underwriting was denied due to problems like a low credit score, high DTI ratio, and insufficient cash reserves, it might take time to resolve these problems before you can complete the loan approval.
TIPS ON HOW TO SPEED UP THE UNDERWRITING
While mortgage underwriting can be very complicated and frustrating for any potential borrower, there are steps you can take to allow your loan application to sail through as smoothly as possible:
The Phipps Team has excellent preferred lending partners who are here to help you through the underwriting process. Contact us to request a list of our preferred lenders at email@example.com.
Denver Market Updates
The numbers are in for August - Check out the latest market data for the Denver real estate market.Read Post
Check out these fun events around Denver this month!Read Post
Denver Market Updates
The numbers are in for July - Check out the latest market data for the Denver real estate market.Read Post
Looking to the future? Here are our best predictions for what to expect from real estate in Olde Town Arvada in the coming...Read Post
Denver Market Updates
The numbers are in for June - Check out the latest market data for the Denver real estate market.Read Post
Host your next fabulous private event at an incredible Olde Town Arvada restaurant.Read Post
Empower yourself with the expertise and breadth of experience a trusted real estate agent brings to the table.Read Post
There's no better time to sell in the Denver Metro area than now!Read Post
Colorado offers some of the most beautiful mountain scenery in the world. Below are the best ways to get outside and enjoy...Read Post
Check out the best places to dine outdoors in Olde Town!Read Post
Celebrate the “Mad Men” era with timeless, fun decor.Read Post
Located in West Denver, Arvada is one of the most sought-after communities to raise a family. Here’s why.Read Post
When it comes to moving, the first step is picking the right neighborhood.Read Post
Make your home "millennial-friendly" to appeal to the largest group of prospective buyers!Read Post
Knowledge is power! Be informed on all things mortgage underwriting.Read Post
Don’t forget that you’re better and wiser this time.Read Post
The first offer on your home is the one worth taking.Read Post
Reflect on how the house has served its purpose.Read Post