Underwriting is one of those words that you know is related to lending but still don’t quite understand. Let’s discuss the underwriter’s responsibility, the underwriting process, and how you can make underwriting as smooth as possible.

What is Underwriting?

Underwriting happens when your lender carefully checks your finances to determine if you qualify for a mortgage. An underwriter looks at your income, assets, debts, and credit history using documents like pay stubs and bank statements. This information helps to ensure that you can afford mortgage payments and that the property's value matches the loan amount requested. Being organized and responding quickly to requests during underwriting can speed up the process and improve the chances of getting your loan approved.

The Underwriter’s Responsibility

Here is how the underwriting process fits into the our Excellent Loan Process.

Our underwriter checks your finances and credit history to see if you can afford the loan. They are our third line of defence, ensuring the documentation you provided via the processor and loan originator is in line with the agency guidelines from Fannie Mae, Freddie Mac, and Ginnie Mae or the jumbo investor. 

Your underwriter will review:

• Your credit: They look at your credit score and credit report to see if you've paid bills on time or had money problems before. Different loans have different score requirements, but generally a higher credit score means lower interest rates for you.
• The home's value: They arrange for an independent appraiser to check the home’s value and ensure it aligns with the loan amount. If the value of the property is lower than the approval amount, you might negotiate or pay the difference.
• Your income and job: They need proof of how much you earn and where you work to predict whether or not you can to pay future mortgage payments. You will submit your W-2s, pay stubs, and bank statements. If you're self-employed, you'll provide profit statements and tax returns. Tell your underwriter if you are receiving a monetary gift to assist in the purchase of a home. (Learn more about gift taxes and lifetime exclusions here.)
• Your debt-to-income ratio: They look at how much you owe compared to your income to make sure you can handle monthly mortgage payments, property taxes, and insurance. To find this ratio, they add up all of your monthly debt payments then divide by your total monthly income. Lenders prefer debt-to-income ratios at 50% or less.
• Your assets and savings: Your savings, investments, and property can strengthen your application. Lenders want to ensure that can easily cover the down payment and the monthly payment as this decreases the chance you would be late on mortgage payments or default on your loan. 

After evaluating all the data, the underwriter may issue a conditional commitment. This means that after they underwrite the file, they go back to the processor and say that the loan is conditionally approved, possibly pending a letter of explanation or clarification on documentation. For example, they may say, “Hey, there are a couple of large deposits here in the actual bank statements that need to be explained.”

The underwriting process can be nerve-racking. If you do not meet the requirements, they could deny the loan. One of the underwriter’s jobs is to help you avoid taking on a mortgage that is too expensive for you to manage. 

Length of the Underwriting Process

The time it takes for underwriting can differ for every mortgage loan. The industry average is 30-45 days, but that is cut by weeks for our Buyer’s Edge clients because our team fully underwrites your loan before you even put in an offer. (Send me an email at Leo@Anzoleaga.com learn more about the Buyer’s Edge.) Sending all required documents to your lender promptly makes the mortgage application process smoother.

Tips to Optimize Your Underwriting Journey

• Avoid applying for new lines of credit during the loan approval process if possible.
• Respond quickly to processor requests makes after you receive your conditional commitment and underwriting approval.
• Be honest about your your income, debts, and anything else related to your finances. If there's something unusual in your credit report, explain why it happened. Being upfront allows all of us to be proactive.

Summary

Your lender’s underwriter works with your loan officer and processor to evaluate your financial details and determine conditional loan approval. An underwriter is skilled in finance, and they assess your income, savings, debts, credit, and property information through the documents you provide.

You have the Buyer’s Edge when you work with the Leo Anzoleaga Group. While most lenders provide a pre-approval letter, our qualified borrowers receive loan approval, meaning you are able to make offers that are as good as cash and close days or even weeks faster. 

Ready to explore your mortgage options? Schedule a free no-obligation consultation with our team.

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