How Does Mortgage Loan Underwriting 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. Thinking of refinancing? Grab our free worksheet to quickly calculate your LTV and assess all of your options here »
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? If you have a mortgage AND a car loan, student loan or credit card debt - you can reduce your monthly costs with a SmartREFi™ Photo Source: Royalty free image from Pixabay
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