After finding the home of your desires, you were preapproved for a mortgage. You may now receive a mortgage and become a homeowner since your offer has been approved, right? Hold up a second. You must still go through the underwriting process.

What is mortgage underwriting? A preapproval for a mortgage does not ensure you will be granted a loan. After locating a property to buy, the next step is to submit a full mortgage application, which may be done with the same lender that preapproved you or with a new lender altogether. Before granting you the loan, the lender will conduct the "underwriting" process, during which they will conduct a more thorough investigation into your financial situation.

What Is An Underwriter?

Your mortgage application is sent to the underwriter when the loan processor has finished putting it together. Determining how dangerous it would be to provide you with a house loan is the responsibility of a mortgage underwriter.

During the manual underwriting process, a real person will be the one to determine whether or not your application will be accepted. A computer algorithm will make a judgment in an automated underwriting system. Nevertheless, a human is still required after the process to make the final decision and if any more paperwork is necessary.

The Mortgage Underwriting Process

When purchasing a house, underwriting is a need. After this stage of the process has been reached, the lender will examine your application and determine whether or not they believe you will be able to repay the loan.

While applying for a house loan, you should have ready your bank statements, monthly bills, tax returns, W-2 forms, pay stubs, and other proof of income. You should send these records to your lender once again, even if you have done so during the preapproval phase.

Financial Review

Once you have filled out the application, the underwriter will review your financial information, including your credit score and report, job history, debt-to-income ratio, assets, income, and the amount of your mortgage. While evaluating an application, an underwriter looks at "5 C's," as stated by Brigitte Morrow Killings.

• Character: Does candidate have a record of consistent employment?
• Credit history: How has applicant dealt with their credit history?
• Capacity: How well does the applicant think they will be able to repay loan?
• Collateral: Does value of the property justify the amount of the loan?
• Conditions: What kind of consistency can we expect from the economy and the employment market?

Appraisal

The lending institution will order a house appraisal to ensure that the loan amount does not exceed the worth of the property. The size and age of the property, in addition to recent sales of similar properties in the neighborhood, are some of the elements that determine the value.

Title Search

The lending institution will order a title search to verify that the property has no pending claims against it, such as delinquent taxes or judgments. The appraisal, title search, and other fees will be included in your closing expenses, which may range anywhere from 2% to 5% of the total cost of the loan.

Decision

In the last step, the underwriter will decide whether to accept, deny, or delay your loan. In the event that your application is approved, you will be free to go forward with the closure of the loan. If you are authorized with certain restrictions, you may be required to provide further documentation before your loan application may be processed.

If you are not approved for the loan, you need to investigate why. Before reapplying, you may need to work on raising your credit score or paying off some of your debt. If any required papers are missing from your file, the underwriter may decide to stop your application. You must provide the lender with the requested information for the application to go forward.

How Long Does Underwriting Take?

While every circumstance is unique, underwriting may be finished in a few days or weeks. The timetable may be thrown off if the application is incomplete, the kind of loan is unclear, or there are problems with the appraisal or title search.

Errors To Avoid

Avoid making the following errors throughout the underwriting process to improve the likelihood of your mortgage closing:

• Avoid closing accounts, making significant purchases, applying for new credit, or paying bills late. Before finalizing the loan, the lender may pull your credit and review your finances. The application might be jeopardized if you modify your financial profile.
• Avoid making a career switch. Changing careers can impact the amount of money a lender is willing to let you borrow.
• Don't ignore lender queries. If your lender approaches you for further information, be sure to react to their inquiry as promptly as you can; otherwise, the processing of your application might be slowed down.