There are different types of underwriting. Underwriting, which is making certain the loan complies with the guidelines for which the loan is for, can be a thorough review or it can be a quick ‘drive through’ type where the loan application gets less scrutiny. What are the differences and why do lenders do both?

First, it depends upon the quality of the loan itself. Early on, when I first got into the business, all loans were manually underwritten. There was no other alternative. All files were documented heavily before the underwriter ever even looked at the file. A fully completed application along with bank statements, paycheck stubs, W2s, and tax returns were needed upfront. Everything an underwriter might need would need to be included with the initial application. If not, or there was something missing, the underwriter would send the loan file right back to the loan officer.

It wouldn’t really take a long time to underwrite the loan, it just might take some time for the underwriter to physically review the file. This process would take less than half an hour or so as long as the file was complete.

Today, almost every loan file is reviewed using an automated underwriting process. This means the application is digitally processed and run through the automated underwriting application. This process takes just a few moments. The file is reviewed, credit scores pulled and the ‘findings’ are produced. The findings are what is needed in order to have the loan ready for final approval and ultimately selling the loan. Selling a loan provides the lender with replenished funds needed to continue making loans.

For loans with a good-sized down payment, say 20% or so along with good credit, there will be very few things needed. In fact, the only things needed for such a file might be to just update some things in the file such as new bank statements or paycheck stubs. The higher the quality of the loan file, the fewer items that will be requested.

When a loan application is submitted, the underwriter might (and generally does) want more information or at least some clarification of some of the things submitted. That’s nothing to worry about as such requests are routine, but still need to be addressed.  Whatever is being asked for is to keep the file in compliance with guidelines. If these requests are made, it means the loan is eligible for approval. Just provide what is needed and move on.