You’ve submitted your initial mortgage application, completed the necessary paperwork, and even had your home appraised. Now, you find yourself at the crucial stage of the loan process - underwriting. This is where the underwriter, acting as a gatekeeper for the lender, meticulously assesses your financial details to determine the risk of financing your home.
In this article, we will explore the mortgage underwriting process, its significance, and what you can expect during this critical phase.
What do Underwriters Do?
Underwriters play a pivotal role in safeguarding the interests of the lender during the home loan process. Their primary responsibility is to assess your ability to repay the loan and evaluate the risk associated with lending money to you. They review various aspects of your financial profile, including your credit score, income, and the appraised value of the property. The goal is to ensure that borrowers are not taking on more mortgage responsibility than they may be able to handle.
Why is Underwriting Important?
The housing crisis of 2008 highlighted the need for stricter underwriting guidelines. Loose regulations during that period allowed borrowers to access funds without adequate means to repay, resulting in widespread defaults. Today, underwriters adhere to stringent guidelines to help prevent the recurrence of such crises, protecting both borrowers and lenders alike.
What Can You Expect During the Underwriting Process?
Further Paperwork May Be Needed
During the underwriting process, underwriters may request additional documentation to gain a comprehensive understanding of your financials. It's crucial to provide any requested documents promptly to keep the mortgage process moving smoothly.
Turn-times May Vary
Depending on the loan type and market conditions, the underwriting process may take anywhere from 5 to 14 days. Understanding the potential timeline may help you manage expectations and plan accordingly.
Borrowers may receive electronic or paper loan disclosures throughout the process. These disclosures are sent to ensure compliance with state and federal laws.
After reviewing your application, the underwriter will issue one of three determinations:
Conditional Approval of Loan
Your loan is cleared for funding, and your lender will discuss any remaining conditions specified by the underwriter. A closing date will be scheduled.
Suspension of Loan
A suspension occurs when there are questions about a critical facet of your loan file. Your lender will work with you to identify and address any concerns, leading to a potential conditional approval.
Denial of Loan
If your file indicates a high level of risk, the underwriter may deny the loan based on industry benchmarks, not personal intuition. For example, perhaps there was a significant drop in your credit score, indicating potential payment inconsistencies and a big risk for a lender.
What Happens If Your Loan Is Suspended or Denied?
Choosing the right lender is crucial, and at Supreme Lending, the relationship doesn't end if your loan faces challenges. Supreme's dedicated team may be able to help overcome underwriting objections, identify errors, and work with you to improve your application.
Understanding the mortgage underwriting process is vital for borrowers navigating the complex world of home loans. As you approach this final checkpoint, being prepared for potential requests for additional documents, varying turn times, and the possible outcomes of the underwriting review can help streamline the process. With Supreme Lending by your side, you can navigate the underwriting process with confidence and increase the chances of a successful loan closing.