Monday, October 20, 2014

How Does Mortgage Loan Underwriting Work?

What is Mortgage Loan Underwriting and how does it work?Whether looking to buy a home or refinance, you will likely apply for a mortgage loan and encounter about the underwriting process. Lenders and loan officers might mention "underwriting" but few home-owners and buyers might actually know exactly what this step is and how it impacts their ability to secure financing.

What is Underwriting?

Underwriting is a process that allows lenders to determine if you qualify for financing based on your level of credit risk. An underwriter is a skilled in-house person who looks at every aspect of your financial profile to determine if its possible and likely that you can repay the debt. The underwriter will consider your mortgage application and verify the information you’ve submitted. This can include verifying with your employer that you are currently working. They may also compare bank statements and tax records to ensure you have substantial income to repay the loan.

What to expect when a loan goes to underwriting?

Most underwriters will consider your debt-to-income ratio. This compares the amount of debt you currently owe and the amount of expendable income you have to offset the new loan. Each lender might work with a slightly different set of ratios which explains why a loan might be declined with one lender and approved with another. But make no mistake – every loan must go through underwriting in order to get approved.

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How long will Underwriting take?

While applying for a mortgage loan is a fairly straightforward process, keep in mind that the actual underwriting process make take a week or more to approve your application. Plus an approval might require additional conditions to be met which may require a second review by the underwriter before the approval is final. Patience on your end will help this process. Once your application has made it through underwriting successfully, you are much closer to securing your new mortgage loan.

Key Take Away

Hopefully, you now understand the role that Underwriting holds in the lending process. Understanding how the underwriting process works will help ease any frustration you might have. It is important that you work closely with your loan officer to make sure you present the best possible application to secure the financing you need.

You Might Also Like: How Long does the Loan Process take?

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All information provided in this publication is for informational and educational purposes only, and in no way, is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Midwest Equity Mortgage, LLC does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Midwest Equity Mortgage, LLC do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.

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