Who is the Mortgage Underwriter?

Chalkboard with underwriter written on it.

Once you apply for a home loan, your mortgage application is organized by a loan processor and then sent to a loan underwriter.  The underwriter determines if you qualify for a mortgage.

Going through the mortgage underwriting process sounds scary.  The thought of  someone (a mortgage underwriter) taking a deep dive into your finances can be intimidating.

If you take the time to get to know the underwriter’s job and the process they take to approve your loans the intimidation can be a bit less painful.

So, what is underwriting? 

Underwriting is the process financial institutions use to measure the eligibility of potential borrowers. They do this by taking an in-depth look at your credit and financial background. The purpose is to determine the risk of offering a loan to a borrower under certain parameters is acceptable.

What does an underwriter do?

In layman’s terms, they are the people that decide whether to approve or deny the loan applications.

How does the underwriting process work?

To help keep the process easy to understand, remember the “three C’s of underwriting,” otherwise known as credit reputation, capacity, and collateral.

The underwriter’s job is to assess borrower’s risk.  They do so by reviewing three things:

  1. Capacity

Capacity deals with a borrower’s actual ability to repay a loan, using things like debt-to-income ratio, salary, cash reserves, loan program and more.  Underwriters look at your savings, checking, 401k and IRA accounts.

Basically, the underwriter wants to know that you can repay the mortgage you’re applying for before granting approval.

  1. Credit

Your credit history is one of the most important factors in the approval process.  When the underwriter requests a copy of your credit report, they search through with a fine tooth comb to view how well you’ve paid off other loans in your life, like; student loans, car loans, and other lines of credit.

Whatever they discover good or bad will help them predict your ability to repay your mortgage on time and in full.

More times than not all of the above will be reflected in your three-digit credit score.  If you’re score is too low you might be automatically eliminated without any determination from underwriting at all.

  1. Collateral

Finally, collateral deals with the borrower’s down payment, loan-to-value ratio, property type, and property use, as the lender will be stuck with the home if the borrower fails to make timely mortgage payments.

What is “turn time”?

The time it takes from submission to underwriter review and their decision, is called “turn time.”  Under normal cirucumstances the turn time is usually about 72 hours.

In order for the decision to be made in the normal timeframe we are assuming that you have provided underwriting with you providing your fully completed documentation to your loan officer.

A completed and well documented loan file will get approved faster and with fewer conditions.

What answers can you expect to hear?

The underwriter will typically issue one of three dispositions – approved, denied or suspended – to your application. If approved underwriting will typically assign a set of conditions you will need to clear to obtain full approval.

Quite frequently, the additional items needed are requested to assure the mortgage meets all of the required standards by any potential secondary investors who will buy the closed loan.

What are your responsibilities?

Your primary job during the time your loan is in underwriting is to move quickly on document requests, questions and anything else needed.  Do not take the inquisition personally, that is what underwriting does.

Provide any last few items and submit as quickly as possible so you can hear the sweet words, “clear to close.”

Please reach out to us with any questions that you may have to understand the process or to have an experienced team help you with your financing needs.

The Certo Team
55 N. Arizona Place Suite #103
Chandler, AZ 85225

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