Understand what a mortgage underwriter does

What Does a Mortgage Underwriter Do?

What exactly does a mortgage underwriter do in the mortgage loan process? Find out who this key player is in your home buying journey.

The mortgage process is filled with many steps and what feels like twists and turns, and mortgage underwriting is a crucial step. But who is the mortgage underwriter helping you, and what do they do?

Working with a Mortgage Underwriter

Mortgage underwriting is one of the most important parts of the mortgage loan process as a whole. This is the process used by mortgage lenders to understand and assess the risk they could take by lending to a borrower.

During the underwriting process, mortgage lenders will review characteristics that could influence this risk, like your credit score, income, debt, and the price of the property you intend to purchase. These pieces all add up to help them understand the risk they’ll take when lending to you, contributing to their final loan decision.

A mortgage underwriter performs this process. How exactly do they do it? Here are the most crucial duties they perform to make this decision:

Review Your Mortgage Loan Documents

First and foremost, the decision regarding whether or not to lend to you comes from the documentation you provide. When you apply for a mortgage loan, you must provide key documents encompassing your income, debt, tax returns, assets you own, and more. Each of these documents shapes the decision-making the mortgage underwriter performs.

They’ll review your documents closely, as these are what will define their decision as to whether or not you’re an eligible borrower. It also allows the mortgage underwriter to assess and document the risk anticipated with lending to you.

Assess the Risk of Lending to You

Loan risk assessment
All loans carry risk for the lender, so they'll complete a thorough examination of your finances before approving your loan.

When the mortgage underwriter is performing risk assessment, they’re factoring in key financial characteristics you bring to the table. To accomplish this, the mortgage underwriter will examine your debt-to-income ratio, which tells them whether or not your monthly expenses are higher than your monthly income. They’ll also review your credit history, credit score, and the consistency of your income.

The healthier your financial standing is on the whole, the more likely you are to be deemed low-risk and get approved for a mortgage loan.

Order a Property Appraisal

In addition to your financial health being assessed, the property you intend to take out a mortgage loan to purchase needs an assessment of its own. This is done through an appraisal, which the mortgage underwriter orders.

The home appraisal process is performed by an impartial, qualified, professional appraiser to determine the home's true value. A home appraiser creates an appraisal report on the property to calculate what the home is worth in the current market conditions. They visit the home and evaluate the property, checking features like its location, size, condition, and amenities.

The appraiser then compares their findings to similar homes in the area that have recently sold. With this data, they can gauge the differences between the result of the home appraisal and the comparable properties in order to determine the most accurate price for today’s market.

Their findings dictate how much the mortgage lender will lend you.

Make the Final Call for Your Mortgage Loan

After compiling critical data about your financial health, the value of the property, and overall risk assessment, the mortgage underwriter is ready to determine whether or not the lender will lend to you.

The mortgage underwriter is a key player in the mortgage process as they are the ones who make the final call. If you’re approved for your mortgage loan, you can proceed to close on the property you plan to buy.

But if you’ve been denied a mortgage loan, the mortgage underwriter must share specific reasoning for their decision.

Provide Clear Reasoning for their Decision

Clear Reasoning Mortgage Approval/Denial
As each lender has different standards, you may not be approved or denied by all lenders.

If your application for a mortgage loan has been rejected, the mortgage underwriter is required to provide their reasoning for their decision. They will provide a report of their findings and insights that led them to deny your application. Common reasons for a mortgage loan being denied include:

  • Having a high debt-to-income ratio
  • Having inconsistent or unpredictable income
  • Having a low credit score

These insights can work out in your favor: they give you a direct line of sight into exactly what areas you need to improve in, allowing you to create a game plan and have real-life data to help when you reapply.

Don’t let the mortgage process — and trying to decipher it all — hold you back from pursuing homeownership. There’s a lot of pieces to the mortgage puzzle, but it’s not impossible. With the help of a trusted professional real estate agent local to you, you can get hands-on guidance in finding your perfect home, and securing a mortgage loan to help you purchase it.

These pro agents are in your market, and ready to connect. Get in touch with them on RealEstateAgents.com.

Myron Lo
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