How Mortgage Underwriting Works

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Congratulations! Your purchase offer on a new home was accepted. If you’re in the middle of emptying cabinets or filling out a change-of-address form, slow down. It’s important to navigate the mortgage-underwriting process with your lender before you start wrapping dishes and updating contact information. The more you know about the mortgage process, the better prepared you’ll be to respond to requests that might otherwise delay your move.

We’re here to help with an explanation of where mortgage underwriting fits into the mortgage process, what to expect, and how you can help expedite securing the keys to your new home.

The Mortgage Process

The mortgage process consists of five key steps.

Step 1: Preapproval – The lender will collect information about your income and perform a credit check. If you meet the minimum requirements, you can move on to the application.

Step 2: Application – You’ll be asked to complete a loan application that requests additional personal and financial details. Supporting documentation must be submitted with your application.

Step 3: Loan Processing – The lender ensures all required loan documents are on file before sending your information to underwriting.

Step 4: Underwriting – Your information is reviewed by the lender’s underwriting department to determine the likelihood of loan repayment.

Step 5: Closing – All parties involved come together to finalize the transaction by signing legal and financial documents.

How Mortgage Underwriting Works

While it might seem like the process slows to a crawl after you submit your loan documents, lenders are working behind the scenes to move your loan through the next steps. During this time, they may ask for additional documentation to verify the information you provided in earlier stages. Examples include:

  • Verification of Income & Credit: Sources of income will be confirmed by contacting the employers listed on the loan application. Self-employed individuals may need to provide up-to-date income reports, copies of tax returns, or copies of bank statements. Keep in mind, if more than 120 days have passed since your lender has obtained your credit report, another credit report will be requested to ensure you still meet the minimum requirements for the loan.
  • Verification of Assets: The list of assets you reported on prior documents will be verified using account statements and other necessary methods. Assets may include cash reserves, high-value possessions, and funds you have been gifted to help with the down payment or closing costs.
  • Verification of Deed and Property: The lender will confirm that the property you intend to purchase is being sold by the rightful owner. This process protects you from potential untrustworthy sellers trying to sell the property to multiple buyers simultaneously or from someone trying to sell a property they do not own.

How Long Mortgage Underwriting Takes

The process could take from a couple of days to several weeks. Your responsiveness to requests for information will influence how quickly your loan clears the underwriting process. However, things outside your control could also affect the timeline. For example, any issues with the appraisal or property deed must be resolved before closing.

How to Prepare for Mortgage Underwriting

 You can help make the mortgage underwriting process a smooth one by following these tips:

  • Be honest about your finances. If the lender cannot verify your income, you may lose loan eligibility.
  • Respond to requests as soon as possible. Avoid delays by responding to emails and phone calls from your lender the same day you receive them.
  • Don’t apply for other credit during this process. Adding new lines of credit or accruing additional debt will change your debt-to-income ratio, a calculation used to gauge whether your income can support the new loan.

The right mortgage lender will walk you through the process and work with you to make things easy. Read about How to Choose a Mortgage Lender even if you’ve already received a home loan pre-approval. You can still shop around for financing options that may work better for your situation.

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