The more you are prepared and understand the mortgage process, the easier obtaining a mortgage can be! In order to avoid the cascade of multiple foreclosures that befell the industry during the housing bust, lenders are being more careful about scrutinizing borrower eligibility. If you are considering buying a home, it’s a good idea to talk to a loan officer early in the process in order to get the ball rolling on the approval process for your mortgage. You can expect to have your finances closely scrutinized during the underwriting process, and there are multiple documents that you will need to provide your lender.
Here are answers to some questions about the underwriting process.
What is the underwriting process?
Underwriting is the “heart” of the mortgage loan process. An underwriter is the individual employed by your lender to review all of the accumulated documents that you have provided during the loan process. Sometimes the underwriter will request that additional documents be provided during the underwriting step in order to verify whether you will be a good risk for the investors. Once the underwriter reviews all of your documents, he or she will decide whether to approve your loan.
What documents are reviewed during underwriting?
If the loan officer has done a professional job up front and explained properly what documents needed to get your loan approved, the process should go very smoothly. You can expect the underwriter to look at all sources of income, including, in most cases, a 2-year employment history, current pay stubs, W-2 statements, two years’ of tax returns, bank account statements, other assets and holdings, and additional sources of income. Additionally, if you are receiving or paying alimony or child support, documentation will be required to substantiate the payments or the income. Expect also to provide a copy of the purchase and sales contract and a copy of any checks you have already written as earnest money to the seller.
In order to assess your credit risk and current debt, the underwriter will carefully review your credit report with current FICO scores and review the report for any issues. The underwriter will also look at the appraisal for the property to make certain the amount of the loan for which you are applying is commensurate with the property value.
Once the underwriter has all the documentation required on your loan they now go through the process of assuring that your total loan package will be accepted by an investor. Each investor has different guidelines that need to be considered when the underwriter begins this process. After this, the underwriter will be able to tell us whether or not your loan fits the guidelines and whether it is approved.
What else can I expect during the underwriting process?
If the underwriter needs clarification of your income, debt, or additional information about the property you intend to purchase, be ready to track down any necessary documents quickly and hand them over for review. Depending on how many documents he or she plans to review to give your loan the final approval, the underwriting process should not take more than a few days to complete. If there are any vague or contradictory areas in the documents that you provide, you can expect the process to stretch out as the underwriter does his or her research into the situation. If you are prepared to provide whatever is requested up front the underwriting process will go more smoothly. As always, your loan officer is your best resource for understanding the underwriting process and keeping you abreast of how long you might expect to wait to hear about final approval. If you have additional questions, ask your loan officer for more information.
