Back to the Frequently Asked Questions Page

The Underwriting Process

Underwriting - This process is usually performed by an "underwriter" who evaluates the borrowers credit, collateral value, and risk involving the loan. After calculating those factors the underwriter will then make a decision to accept the loan or to deny the loan, if denied sometimes there maybe something that the loan must provide before moving towards funding.

After your loan is submitted to a lender, the underwriter will evaluate your file, and issue a conditional approval. This can generally be considered an approval, as long as you are able to meet the lender's conditions. However, the conditional approval is NOT a commitment to lend on the part of the lender.

Underwriting is different from lender to lender and program to program. An underwriter is trained to be very detailed and catch items that raise red flags. Due to some of the fraud that has hit the mortgage industry, albeit a very small amount in comparison to the legitimate deals that continue on a daily basis, lenders have lost money. These losses have caused lenders underwriting guidelines to tighten up. One of the many things now looked at with more scrutiny is the appraisal. This is one area where lenders can lose money if they have to take a home back in the case of foreclosure providing the home is not worth the amount the appraiser stated. Lenders now have strict appraisal reviews and in many cases have their own department that handles the review although it can be outsource. These reasons are why the underwriting process can be lengthy

Underwriting is the main step in truly being approved for a mortgage. This step is where an underwriter compares the information provided by an applicant with the lending guidelines of that particular lender. The underwriter will either approve the loan as submitted, approve the loan when certain conditions are met or deny the loan because it does not meet its guidelines.

As you cannot predict an underwriters decision, a good mortgage broker should be able to get a good feel as to what expect from his/her underwriter.

Underwriters evaluate the risk of a loan submission based on the guidelines established for the loan program. Underwriters are often able to get an exception to certain guidelines, however it is very rare that an underwriter will grant more than one exception on any one single file.

Underwriting is the choice made on whether to give a loan to a potential home buyer, based on a full review of credit, assets, employment, and other factors. After reviewing all these determining factors that determine the overall risk, an appropriate rate and loan amount is decided.

Many mortgage brokers have access to Automated Underwriting Engines in both conventional and sub prime lending that will Underwrite a loan instantly and give feedback on the conditions needed to close the loan.

The underwriting process involves the scrutiny of the borrower's credit report, making sure that the borrower has demonstrated a history of responsible credit management. In addition, if the mortgage program applied for is a full-documentation loan, the underwriter also evaluates the borrower's income and assets to ensure the borrower's capability to repay the loan and ample reserves for down payment and other expenses.

You can help keep the underwriting process flowing smoothly, by supplying any information requested in a timely manner.

The Underwriting Process - The underwriting process occurs when a new loan file is submitted to a lender. They look at every detail of the loan to see if it is an acceptable risk. Afterward, they deny the loan of offer a conditional approval.

In recent years, loans are mostly underwritten with automated systems. Underwriters main function nowadays is to confirm that the information entered are accurate, to clear approval conditions, and to ensure the deliver ability on the secondary market.

After you have applied for your home loan with a loan officer your loan officer will prepare a package to provide that underwriter your loan application. A good loan officer will put the package of your application together in a very clean, clear way that the underwriter knows exactly what you are looking to do with your refinance or home purchase. Therefore, the next step after you deal with a loan officer is for your file to be sent to an underwriter and be underwritten. An underwriter is a key part of the loan process. The underwriter can make or break a loan and generally has the authority to deny a loan that he/she does not feel comfortable signing off on. The underwriter will look at every loan application and document submitted and make sure addresses match up, income seems reasonable and is well verified, appraisal report is acceptable, social security numbers and dates of birth match up, names and addresses are filled in completely and accurately, loan application is filled out 100% completely and accurately. The underwriter may condition the loan officer for items that he/she feels are deficient or not acceptable to the lenders standards.

The underwriting process is when you will be asked to gather additional information for your mortgage professional. Often times they will submit a loan, and the underwriter will ask for more documentation on certain items. Do not be alarmed, this is a very common process.

The underwriter has the ability to approve or deny your loan application. They act as quality control agents for the lender and there main job is to spot potential problems in a loan file that may cause the company to lose money.

Topics that will reviewed by an underwriter are commonly : borrowers credit file, rent history, bank account and asset information, appraisal and title of the home.

Often your mortgage advisor can explain a situation that is not evident to the underwriter in such a way that the problems are removed without you doing anything.

The Lending Process - The Lending process starts with interest from the borrower in either buying a home or refinancing. When thinking about buying a home many people start to look for houses first. The first step should always be to consult with a mortgage professional. When talking with a mortgage broker you will need to disclose information about credit, income employment, and housing history. These factors all contribute to the ability to qualify for a loan. The mortgage broker will often get a full approval before issuing you a pre-approval letter. This will need to be provided to any real estate agents involved with the purchase of a home.
In either a refinance or a purchase the remainder of the process is relatively the same. Often as a borrower you will shop for the best rate once you have gotten pre-approved. The best way to do this is to get your credit scores from the first broker so you can provide it to subsequent brokers. This will help limit the number of inquiries on your credit. Make sure you are comparing apples to apples; get the type of loan, estimated payment (just principal and interest), the rate, the estimated closing costs, and the APR. Also be aware that interest rates vary much like any other financial market, rates can go up or down from day to day, so try and make all your calls on one day.
Once you have chosen a broker you will be required to sign an application package. This will consist of the application, disclosures, good faith estimate and several other documents. At this point the broker will also require copies of documentation: pay stubs, W-2s or 1099s, bank statements, current mortgage statements, home owner’s insurance statements, sales contract, etc. The type of documentation requested will depend on the type of loan and if it is a purchase or a refinance. In the case of a refinance there is not much else for the borrower to do, in a purchase you will need to start to contact an insurance agent and work with your realtor for the home and pest inspections, etc.
Now is when the mortgage broker starts to put your loan together for the lender. The broker orders the title work, and the appraisal, and starts to verify the information and documentation provided. The broker may need to contact your bank, employer, landlord, or other creditors to get written confirmation of the information you provided on the application. Once the title work and appraisal are complete, which may take a week or two, the broker compiles all the information and organizes it into the specific format for submission to the lender that has been chosen for your loan. The lender reviews the submission in a process called underwriting. Once the lender has verified all the information and documentation submitted they may ask for additional documentation or information. If they need anything else they will send the broker a list of conditions or stipulations (stips). If nothing else is needed they will issue a clear to close and the broker will schedule the closing with the title company, borrower and the real estate agents and seller in the case of a purchase.

A Quick Summary of the Loan Process:

-Find the mortgage that best fits your needs.
-Fax, mail, or deliver the paper work that a loan officer has requested.
-Sign and return the loan papers.
-Get the home appraised.
-Loan goes to underwriting and additional documents may be requested.
-The loan is approved and closed.

The length of time that the lending process will take can vary. Factors that go into the amount of time it takes include who the lender is, how busy the lender's underwriting department is at the time your file is submitted, availability of the appraiser and other things. Delays by the borrower in getting needed documents to the broker or lender can also cause the loan process to take longer.

You will also need to provide the name of your insurance agent so that your policy will reflect accurate mortgagee clause information.

The Lending process can be nerve racking to some borrowers. A competent loan officer will keep you informed so you know what stage the lending process is in. Borrowers should be prepared for bumps along the way. These bumps happen most often because everyone involved in the process has their own time schedule including the borrower. A good loan officer will explain this to you and minimizes these bumps in the process.

One of the most important features of being involved in the lending process is not delaying. There are so many moving parts in the process that any one person's delay can cause the time to funding greatly prolonged.

Always be up front with your loan officer and do not withhold information from him. Your loan officer will look out for your best interest, and the best way to do that is by having all the facts up front.

Part of the lending process is locking the interest rate. You can lock rate any time from the initial application to 3 days before closing. Depending on whether it is a purchase or refinance, most banks allow you to lock for 15, 30, 60, 90 days, or even longer. The longer an interest rate is lock for, the higher the interest will be. Therefore, you should always discuss with your loan officer about when and for how long should you lock your interest rate.

The documentation requested of you, during the loan process, from your mortgage professional will vary depending on the loan you are attempting to get. For example if you are doing a stated income/stated asset loan, then you will not be required to provide tax returns, bank statements, or other things of this nature.

It is a good idea to go over with your mortgage broker the steps that he/she will have in their personal lending process as the time schedules and procedures may change from lender to lender.

If you have any questions about what point you are at in the process, you can always call your loan officer and ask. They are there to help you, answer all your questions, and put your mind at ease.

HOME NEWS ABOUT US PRODUCTS CALC CONTACT US LINKS

APPLICATION RESIDENTIAL COMMERCIAL FIRST TIME BUYER HELOC

FREQUENTLY ASKED QUESTIONS STATES PAGE MORTGAGE ARTICLES

FOREX FOREIGN EXCHANGE TRADING

Sitemap URL List