What is the Job of a Mortgage Underwriter?

Here’s some Q&A with regard to the home loan approval process: “What do underwriters do?” Once you actually apply for a home loan, your mortgage application will be organized by a loan processor and then sent along to a loan underwriter, who will determine if you qualify for a mortgage. The underwriter can be your best friend or your worst enemy, so it’s important to put your best foot forward. The expression, “you’ve only got one chance to make a first impression” comes to mind here. Trust me, you’ll want to get it right the first time to avoid going down the bureaucratic rabbit hole. Put simply, the underwriter’s job is to approve, suspend, or decline your mortgage application. If the loan is approved, you’ll receive a list of “conditions” which must be met before you receive your loan documents. So in essence, it’s really a conditional loan approval. If the loan is suspended, you’ll need to supply additional information or documentation to move it to approved status. If the loan is declined, you’ll more than likely need to apply elsewhere, with another bank or mortgage lender. Now you may be wondering how underwriters determine the outcome of your mortgage application? Well, there are the “three C’s of underwriting,” otherwise known as credit reputation, capacity, and collateral. Credit reputation has to do with your credit history, including past foreclosures, bankruptcies, judgments, and basically measures your willingness to pay your debts. If you’ve had previous mortgage delinquencies or even non-housing related delinquencies, these will need to be taken into account. Typically these items will be reflected in your three-digit credit score, which can actually eliminate you without any further underwriting necessary if you fall below a certain threshold. Your history supporting significant amounts of debt is also important; if the most you’ve ever financed has been a plasma TV, the underwriter may think twice about approving your six-figure loan application. Capacity deals with a borrower’s actual ability to repay a loan, using things like debt-to-income ratio, salary, cash reserves, loan program and more. This covers whether the loan is interest-only, an adjustable-rate mortgage or a fixed-rate mortgage, cash-out refinance or simply rate and term. The underwriter wants to know that you can repay the mortgage you’re applying for before granting approval. If you’ve had previous mortgage delinquencies or even non-housing related delinquencies, these will need to be taken into account. Typically these items will be reflected in your three-digit credit score, which can actually eliminate you without any further underwriting necessary if you fall below a certain threshold. Your history supporting significant amounts of debt is also important; if the most you’ve ever financed has been a plasma TV, the underwriter may think twice about approving your six-figure loan application. Capacity deals with a borrower’s actual ability to repay a loan, using things like debt-to-income ratio, salary, cash reserves, loan program and more. This covers whether the loan is interest-only, an adjustable-rate mortgage or a fixed-rate mortgage, cash-out refinance or simply rate and term. The underwriter wants to know that you can repay the mortgage you’re applying for before granting approval. Mortgage Underwriter FAQ. Do underwriters work for the bank/lender? Yes, underwriters are employees of banks, lenders, and mortgage bankers. They work on the operational side of things, making loan decisions after the sales team brings the loan in the door. Why do underwriters take so long? Hmm…I don’t know, because they’re approving a six-figure loan amount, or seven, to a complete stranger. The actual underwriting might not take that long, but the amount of available underwriters (humans) might be low. So you could just be in the queue. A clean loan file will get approved faster and with fewer conditions so get it right before the underwriter even sees it. Do underwriters verify employment? While employment is generally verified nowadays when you take out a mortgage, it might not be the underwriter verifying it. Instead, the loan processor may obtain the verification of employment (VOE). Many use the “The Work Number,” an independent third-party employment verification company now owned by credit bureau Equifax. Have more questions? Give us a call at 281-907-6401, or visit us online at TxPremierMortgage.com.