What Goes On During Mortgage Underwriting?

Posted on: 6 June 2022

Once you have submitted the application for a mortgage loan, you will enter the underwriting period. Mortgage underwriting allows the lender to decide if they are willing to take the risk of lending money to borrowers for a home. They are also evaluating the applicant's ability to meet the requirements. Read below and find out what is going on with your mortgage during this time.

What Is the Risk?

Underwriters review several overall aspects of the borrower to determine the risk. That might include a survey of their debt-to-income (DTI) ratio, their history of paying bills, their income, and more. Those that have issues with any aspect of the evaluation may have more of a challenge being approved.

Specific Loan Requirements

This area of underwriting looks at the type of loan the borrower is applying for and determines their ability to meet the requirements. For example, some loans require the borrower to be below a certain income level to be approved. Each type of loan will have its own specific requirements.

Verification of Documentation

Borrowers must submit a lot of paperwork when they apply for a mortgage. That often includes pay statements, bank statements, and more. The underwriters use this final part of the process to check with employers, banks, the IRS, and others to verify the facts on the application. They can request tax transcripts from the IRS, for instance, to verify income for those who are self-employed.

What to Expect

During the underwriting process, your lender will keep you up to date on what is happening with your mortgage at every step of the way. In some cases, you will be asked to supply additional documentation. If so, comply with the request as soon as possible so you don't delay the process.

The underwriting time element depends on several factors. Real estate markets are very busy and loan underwriters may be taking longer to approve mortgages due to a backlog. The type of loan the borrower is applying for also affects the time required for underwriting. Government-backed mortgage products may take longer because they require more steps, checks, documents, and more.

Learn more about the underwriting process by speaking with a home loans service. They can provide you with a better idea of what to expect when you apply for your loan and provide you with some tips so that you can get ready for this big event.