The Mortgage Underwriting Process Explained

What can you expect during the mortgage underwriting process? Take a behind-the-scenes look at this crucial part of getting a mortgage.

You’ve got your mortgage pre-approval. You’ve picked out your dream house – and it’s within your budget! Are all systems go for your home purchase? Not yet. You still have to make it through the mortgage underwriting process.

Just like being pre-approved for a credit card, being pre-approved for a mortgage doesn’t automatically mean you’ll get the loan; that requires a more detailed financial picture. In this article, we’ll take a beginner-friendly look at mortgage underwriting. When it’s time to make an offer on a new home, you’ll know exactly what to expect.

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What Is Mortgage Underwriting?

In the mortgage industry, “underwriting” is thoroughly analyzing and verifying an applicant’s creditworthiness and financial health. In other words, it’s all about determining whether the loan company wants to offer you a loan. If an applicant presents a significant risk, they may get a loan with a higher interest rate – or be denied. But if an applicant has a record of sound financial decisions and can prove their ability to repay the loan over time, they’ll probably be offered very favorable terms.

During the underwriting process, underwriters will examine your income, assets, debt-to-income ratio, and credit history. This tells them how likely you are to make your payments on time. They’ll also look at the home price, your projected down payment, and the property’s appraised value to make sure the loan fits your circumstances.

Lenders often use guidelines developed by other agencies like Fannie Mae, Freddie Mac, or the FHA in the underwriting process; this is because different loan types have different requirements. Additionally, lenders may have some terms of their own that applicants have to meet.

Underwriting used to be a lot of tedious work within a file. At Mortgage 1 we use AI Underwriter to its full advantage. This cuts down on underwriting time and helps us perfect the mortgage process thus making the consumer experience flawless.

A Step-by-Step Guide to the Mortgage Underwriting Process

So, what happens during mortgage underwriting?

The entire process can take a few days to a few weeks, depending on how the mortgage lender manages it and whether any snags pop up along the way. As a general rule, allow at least a couple of days for each step. You can speed things along by providing full, true, and accurate information and answering any questions promptly. Let’s see what each step looks like:

  1. Technically, pre-approval happens before the mortgage underwriting process; this is a simple check on your credit history, income, and assets. You can get pre-approved by several mortgage lenders and choose the most favorable offer. Read more about mortgage pre-approval here.

  2. After you’ve been pre-approved and you’ve found your (prospective) new home, you’ll start getting final approval on your mortgage. At this point, you’ll have an actual property lined up; you may even have a contract. Your mortgage lender will make a more detailed examination of your financial situation, including verifying your income, assets, and debts. You’ll need to provide verification documents (tax forms, bank statements, etc.) if you haven’t already done so.

  3. Now that your financial situation is clear, the underwriters will scrutinize the property. Is it worth the mortgage amount? Usually, the home will have to be professionally appraised (and possibly inspected) during this step. You may also need to have a title search or title insurance to ensure there are no legal obstacles to your purchase of the property.

  4. At this point, all the information is in; it’s time to wait for the underwriters’ decision. You can be approved, denied, or asked for additional information – if that happens, make sure you answer promptly and accurately. Once your mortgage is approved, you can handle any contingencies to the purchase agreement, finalize the deal, and close on your new home.

Mortgage 1’s Streamlined Underwriting Process Makes Getting a Mortgage a Snap

And there you have it – what to expect during the mortgage underwriting process. It can be time-consuming and stressful, but it doesn’t have to be. Do your homework in advance, make sure your credit report is accurate, and supply the correct information with documentation and it should go smoothly. With Mortgage 1 Pro Snap Digital Mortgage, you can speed up the whole process and enjoy the convenience of a digital mortgage application.

Heidi Gates