What Is the Mortgage Underwriting Process?
Part of the mortgage financing process, the mortgage underwriters are specialists who review your loan application. the mortgage underwriters look at your application and say, “Hey, I think Jean can pay back a mortgage.” Or “No, Jean is terrible with money.” What’s the underwriter looking for? Basically, they want to see if loaning you money is risky or not. As part of the approval process, underwriters use specific guidelines and even computer programs to check the levels of risk in your mortgage loan. Two ways to process your loan is thru automated underwriting and manual underwriting.
Automated underwriting is a computer-generated process. It can be used for several kinds of loans, not just mortgages. With just a small amount of info (like your Social Security number, address and annual income), the program can gather things like your credit history—if you have a credit score. And since the automated underwriting system is preset with certain rules and guidelines, it can process things quickly.
Manual underwriting is done by a person, not a computer program. The underwriter working on your loan reviews your loan application and uses supporting documentation to figure out whether or not you can afford a mortgage. If you have special circumstances, like a decent savings and income worth but no credit cards or no FICO score (aka you have money but no debt), your lender might choose manual underwriting instead of an automated process.
Both process require documentation, but manual underwriting mean you have to bring more paperwork, and it typically takes longer than the automated process. But that makes sense, right? You aren’t dealing with a preset computer program but with a living, breathing human.
What Does an Underwriter Evaluate? There are three C’s, your credit, your capacity, and the collateral:
- Credit. The underwrtier will look at your credit history, and yes your credit score. Do you pay your bills on time? Do you pay the full amount? HAve you kept a payment record and documents to provie that you can pay the monthly house payment?
- Capacity: Be prepared to document your income and assets, including your Income and employment, your assets, your liabliities (think child support or alimony), The underwriter wants to make sure you can afford the mortgage loan both now and in the future.
- Collateral. Your down payment and home value. The underwriter needs to know the value of the home you’re buying, which is why the lender will require an appraisal as part of the closing proceses. Other real estate realted documents like a property survey, flood insurance, home ownerse insurnace, title insurance,etc. Last but not least, the underwriter considers your down payment. The bigger your down payment, the less risky the loan is to the lender.
How Long Does Underwriting Take?
The underwriting process can take anywhere from a few days to weeks. Your loan type, financial situation, missing paperwork, and issues with property surveys or title insurance are all things that can affect how long it takes an underwriter to approve, suspend or deny your mortgage.Keep in mind that the underwriting process is just one of the steps in closing on a house. Other factors in the home-buying and mortgage loan process can dramatically affect how long closing on your house takes.
What Are the Steps of the Mortgage Underwriting Process?
Step 1: Apply for the mortgage.
Step 2: Receive the loan estimate from your lender.
Step 3: Get your loan processed.
Step 4: Wait for your mortgage to be approved, suspended or denied.
Step 5: Clear any loan contingencies.
Step 6: Close on your house. – Clear to Close are magic words to every Realtor and their client.
As always, you can count on Tony Clark Realtors to look out for our clients’ best interest. As active members of our community, your local Realtors are the leading advocates for private property rights and smooth, successful purchases of real estate. Please contact Tony Clark Realtors 270-926-0055 when you’re ready to make a move with real estate.
Tony Clark Realtors believes everyone should feel confident when buying and selling a home. Since 1976 Clark is the community’s trusted real estate advisors. We would be delighted to help you too.
Tony Clark Realtors | 2934 Frederica Street Owensboro, Kentucky | (270) 683-SOLD
Tony Clark Realtors®, LLC is located in Owensboro, KY, and has been representing home buyers and home sellers for over 40 years. Tony Clark Realtors® is also trusted by many property owners to manage their rental properties, having one of the largest portfolios of rental properties available in the area. When you choose Tony Clark Realtors® for your real estate needs, you can have peace of mind as to the high value and quality of service you'll receive.