Understanding the Mortgage Underwriting Process

Underwriting can seem like the most mysterious part of the mortgage loan approval process. What are underwriters? And what do they do?

A Quick Overview of Mortgage Underwriting

Mortgage underwriters assess risk. Using specific, pre-determined guidelines, they look at things like your credit history, debt-to-income ratio, and other assets, to figure out if you can qualify for a mortgage

The underwriter begins by pulling together all of the documentation you’ve supplied to your Loan Officer. They verify your employment and income, check your credit history, and assess the amount of debt you have in relation to your income.

The underwriter also reviews the home appraisal and title documentation and verifies that you have both the savings and down payment funds you’ve reported in your application.

Based on this review, the underwriter will determine if all conditions and guidelines have been met for the product/program for which you have applied. In the event they have not, the underwriter sends the loan application back to the Loan Officer.

Two Types of Underwriting

There are two main kinds of underwriting: automated and manual. Whichever way your loan is processed should not raise concern. Whether your application is reviewed manually or in an automated fashion has more to do with the type of loan program you’ve selected.

• Manual underwriting: At Embrace, our Jumbo and Beyond loans are often manually underwritten to meet specific underwriting guidelines.
• Automated underwriting: Often referred to as a “desk approval,” automated underwriting is used to process Fannie Mae, Freddie Mac, FHA, VA, USDA, and other conventional loans. Automated files are reviewed by a human at the outset. They are also sometimes moved to manual review in order to clarify a particular concern that has arisen during the automated review process.

The Underwriting Verdict

The amount of time between the submission of your application and the approval of your loan is referred to as the “turn time.” Lenders generally advertise a 30 to 45 day turn time.

Underwriting itself can take anywhere from 7 to 14 days, depending on whether the process is automated or manual and whether or not further clarification is needed on some aspect of your loan application. Once complete, Underwriting will deliver one of three verdicts to your Loan Officer.

1. Approved: Even though you’ve been approved, the underwriter may still require further clarification of a late payment, large deposit, income documents, or anything else which may raise concern. This is why your Loan Officer may come back to you for more information after you thought you were done providing receipts, statements, etc.
2. Reviewed: Delays concerning employment verification or other income-related concerns can result in your loan being reviewed and jeopardize your closing. Addressing the problem as quickly as possible can get you back on track and result in an approval.
3. Denied: A mortgage may be denied for a mistake on your application or credit report, to complications regarding title or appraisal of the property you want to purchase. A denial can be overcome by correcting mistakes on your application or credit report, clarifying sources of income, or even choosing an alternative loan program.

Mortgage Underwriting: The Bottom Line

With so many factors to consider when it comes to approving or denying a loan, underwriting is truly where the rubber meets the road in the mortgage loan process.

To facilitate a smooth underwriting review process don’t change jobs, make major purchases, open new lines of credit, or move large sums of money from one account to the other. Keep copies of the all requested documents and any new statements that may come during the review on hand. A proactive approach and quick response on your part will keep your loan application moving steadily toward approval.