The Mortgage Underwriting Process

September 14, 2020 | 3 min read | The mortgage process

The underwriting process is a critical component of the mortgage financing journey. Reaching the underwriting phase means you are one step closer to closing on your mortgage! Here’s what you need to know about the mortgage underwriting process.

What is Mortgage Underwriting?

Mortgage underwriting is the process in which the underwriter does a deep-dive analysis of your credit history and financial background to determine if you are eligible for the loan program based on the lender’s guidelines.

What Do Underwriters Look for?

The mortgage underwriter assesses the potential risk associated with your ability to repay the loan before issuing a final loan approval. To help determine risk, the underwriter will analyze the following factors:

  • Your Credit Score and Credit History
    • Your credit report shows how you have handled debt in the past, such as credit card bills or student loans. The underwriter will look at how well you have made those payments on time and how you manage your credit allowance.
  • Your Income and Employment History
    • Typically, the mortgage underwriter will look for about two years of steady income, especially if you are self-employed. They will review your pay stubs, employment verification letters, tax returns, and any other requested income or employment documents. Understanding how much money you earn each month helps a lender evaluate how much debt you may be able to handle.
  • Your Assets
    • Assets refer to cash in a checking or savings account. The underwriter needs to make sure you have enough liquid assets to cover the closing costs and your first mortgage payment. If you happen to lose your job, reviewing how much cash you have in the bank is a factor used to assess risk.

Did you know – GuardHill offers asset-based mortgage programs that allow you to qualify for a loan based solely on your assets?

  • Your Liabilities
    • Liabilities refer to debt or other financial responsibilities, such as alimony or child support. Reviewing your liabilities helps the mortgage underwriter better understand your monthly financial obligations.
  • The Appraisal
    • An appraisal is a professional opinion on a home’s value. The underwriter reviews the appraisal to ensure that the offered loan amount is still in line with the home’s actual value, referred to as loan-to-value.
  • The Down Payment
    • After reviewing the appraisal, the underwriter will look at the down payment amount. Considering the down payment size compared to the home’s value helps evaluate the potential risk. Typically, the bigger the down payment, the less risky the loan is to the lender.

Tip: Learn more about how to save for a down payment!

When Does the Underwriting Process Occur?

The mortgage underwriting process will begin after submitting a complete loan application. Click here to review the documentation needed for your application!  Once the underwriter has all your requested financial documents, they will begin the underwriting process.

What is the Average Underwriting Process Timeline?

The underwriting process timeline may vary according to the complexity of the loan. The process may range from a couple of days to a couple of weeks, depending on the underwriter’s decision. The underwriting decision may either be approved, approved with conditions, or denied. 

  • Approved
    • If you receive approval from the underwriter, you are clear to close. This means you do not need to provide any other documentation and can proceed to schedule a closing date!
  • Approved with Conditions
    • If your loan is approved with conditions, this means that the underwriter needs to verify additional information, such as an explanation for a large deposit in your checking account, before issuing a final loan approval. You may need to provide other documents or letters of explanation to clear those conditions with the underwriter.

Once the conditions are re-submitted for review, the underwriter will take another look and issue an approval. After you receive the approval, you may schedule a closing date!

  • Denied
    • If your mortgage is denied, your loan originator will work with the underwriter to understand the reasoning behind the denial. An underwriter may often deny a loan because the debt-to-income ratio is too high, or the credit score is too low.

Once you and your loan originator become aware of the reasoning, you can work together to figure out the next steps to move forward with another loan program.

Why Choose GuardHill?

GuardHill has a team of in-house underwriters, which allows for a faster and more seamless underwriting process. Additionally, we work with numerous investors and lenders, which allows our teams to match your financial profile with a loan program that best suits you.