Mortgage underwriting is the procedure that monetary institutions go through to assert whether or not they wish to work with a debtor who has submitted a request for a loan to purchase a home. Your request for a loan will be reviewed, along with your personal and monetary history, to ascertain if you are a good candidate for the loan.

This is the final stage of the request procedure. In the best-case scenario, it concludes with the mortgage underwriter giving the green light to proceed with the closing on the house. (You post some social media photos of your new home as a way to commemorate your success.)

If you are able to demonstrate that you have a thorough understanding of the mortgage underwriting procedure, you will have a leg up on the competition and will have a better chance of being approved for a mortgage.

Let’s take a look at what happens behind the scenes once you’ve submitted your mortgage request and all of the required monetary paperwork has been turned over to underwriting.

What is Mortgage Underwriting?

When your mortgage request is sent off for underwriting, an underwriter working for your creditor will get out a clunky, outdated calculator as well as a magnifying glass in order to have a better look at your monetary background. 

In order to assert whether or not your request is creditworthy, the underwriter will, among other things, verify your income and assets as well as your debts.

It’s likely that you’ve been working with a mortgage loan specialist up until this point, and they’ve been the ones to walk you through the first steps of the request procedure. And there is no question that the loan officer required you to provide a comprehensive history of your monetary situation, which should have included pay stubs and bank records.

After you have handed in all of the necessary documentation, your request will be handled and sent on to the underwriter for review.

What Is an Underwriter and What Does It Do?

Your request for a mortgage loan will be evaluated by an underwriter to assert whether or not it satisfies the requirements of the creditor. They validate the information that you have provided them with and search for anything that doesn’t make sense.

After that comes the time to crunch the numbers. An underwriter of mortgages is going to respond to the following:

  • How much of your salary goes toward paying off the debt that you have? (Your debt-to-income ratio, often known as DTI)
  • Have you been able to save enough money and put aside enough for a sufficient down payment in case you end up needing it?
  • What percentage of the money that you wish to borrow is equivalent to the value of the property? (The loan-to-value (LTV) ratio of the property)
  • How likely is it, taking into account your credit record, that you will be able to keep up with the payments on your monthly mortgage?
  • Your request will go through a careful review procedure, during which the underwriter will highlight any potential concerns that may require additional examination.
  • The overarching question is whether or not you can be counted on to keep up with your mortgage payments.

How Does the Mortgage Underwriting Process Work?

So, let’s get this straight: how exactly does everything work? The procedure of underwriting a loan can be carried out in a few different ways, including the following:

  1. Automated underwriting – The most successful requests for automated reviews are the ones with the fewest moving parts. Your information will be loaded into a software program, which will then do a check using mathematical methods and computer modeling. In real life, the decision is always reexamined before being implemented.
  1. Manual underwriting – There are several lending institutions that employ humans to perform the underwriting. This is particularly helpful for debtors whose monetary situations are either particularly complex or particularly distinctive. 

    You are able to discuss any potential warning signs, such as a significant shift in income or previous problems with debt. You will also have the opportunity to discuss the reasons for your inconsistent income, which is something that may come up throughout the request procedure for mortgages submitted by debtors who are self-employed.
  1. Underwriting procedure that combines automated and manual steps – To decide whether or not a debtor is eligible for a loan, creditors will sometimes utilize a mix of automated and manual underwriting procedures. Sometimes an algorithm just can’t handle everything. Your current monetary standing as well as the kind of loan you intend to apply for will both play a role in the decision.

Manual vs. Automated Underwriting: What’s the Difference?

In order to evaluate the levels of risk associated with your mortgage loan as part of the procedure of getting your mortgage approved, underwriters will employ a set of pre-asserted standards and sometimes even computer programs. Automated underwriting and manual underwriting are the two approaches that can be taken for this task.

The underwriting phase of automated underwriting is conducted entirely digitally. In addition to mortgages, it can be utilized for other sorts of loans as well. 

You only need to provide the program with a few pieces of information (such as your Social Security number, address, and annual income) for it to be able to compile information about things like your credit record, provided that you have a credit score.

In addition, the speed with which items can be handled is enhanced by the automated underwriting system’s pre-programming of certain norms and regulations.

In order to complete the loan procedure and move forward with the closing on your property, you will still be required to present an underwriter with specific papers.

On the other hand, a person, and not a computer program, is responsible for the manual underwriting procedure. In order to assert whether or not you are qualified for a mortgage, the underwriter who is working on your loan will examine the loan request you have submitted and will also look at any supporting documentation.

Your creditor may choose manual underwriting rather than an automated one if your situation warrants it, such as when you have a high net worth but no credit record (i.e., you have funds but no debt).

You will need to bring more documentation in for manual underwriting, and the procedure will likely take longer than it would with an automated system. This is to be expected, given that you will be communicating with a real person rather than a preprogrammed computer system.

How Long Does the Mortgage Underwriting Process Take?

When everything is in order, the underwriting procedure for a mortgage might take anywhere from several days up to a week. If that does not happen, it can take a few weeks.

While it may help to search for the elusive “three dots” in your creditor’s text message chat, you’ll have to accept the fact that underwriting is highly complex and subject to many factors, including the complexity of your monetary situation. Furthermore, you may have to wait calmly for an answer from the underwriter if they are currently inundated with requests.

Why Would a Mortgage Underwriter Reject Your Application?

The underwriter is responsible for investigating each and every facet of your request. When you apply for a loan and are turned down during the underwriting step, there are typically one of two reasons behind this:

  1. Since the preliminary decision on the mortgage was made, a number of changes have occurred in your monetary situation. You might be in this position because, for instance, you recently obtained a new loan or you’ve recently become unemployed.
  1. If the underwriter finds something in your monetary history that puts you in the high-risk group, then you will be declined for the policy. This may be the result of, for example, your failure to disclose a monetary commitment or a disparity between the income you reported and the income you actually received. 

There have even been cases in which mortgage requests have been turned down due to improper language used in a payment reference.

Bottom Line

To grant final approval for a loan, a creditor must perform what is known as “underwriting,” which involves a simple verification of your income, assets, debts, and properties.

In order to assert how much of a risk a creditor is willing to take on by providing you with a loan, they consult with an expert known as an underwriter. In particular, underwriters look at your monetary background, your assets, the amount of money you want to borrow, and how likely it is that you will pay it back. 

In the course of this risk evaluation, they will also look at your DTI and validate your earnings and employment information.

It is in your best interest to cooperate with the creditor during the underwriting procedure. Avoid applying for new lines of credit and get back to those who contact you as soon as feasible during underwriting. If you want to have your loan approved quickly, it’s best to be honest and forthright about your monetary situation from the start.

Getting pre-approved is a good first step if you have not yet started the home loan request procedure. It won’t take long, and it will help you better comprehend your monetary situation and your available options. You’ll be completely prepared to apply for mortgages and begin your home search.


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