You have been hunting for an ideal home over the past few weeks and you have finally found one that has everything you need. Be it an open floor plan, a fully furnished kitchen with granite floors, or a backyard for your pet pup to play, the home has everything you always wanted. Everything has fallen in place and your joy knows no bounds. What’s the next step? The mortgage process is about to begin and you start facing the music. You have to opt for the right lender, put all the documents in order, and kick start the mortgage underwriting procedure. Tough times. Before you initiate anything, you have to understand what mortgage underwriting is all about. Get going.
Mortgage underwriting seems to be a bit complicated and it is. To simplify things, when you forward your application, a specialist or you can say an underwriter kind of reviews your application and confirm whether you are eligible to avail of a mortgage or not, whether you are good with your money or not, will you able to pay back or not. So, what’s the basic responsibility of an underwriter? To find out whether lending money is troublesome or not.
Now, you might ask how does an underwriter finds out if you are a risk for them? The 3 C’s i.e. credit, capacity, and collateral come into play. The underwriters find out what they have to from these 3 C’s. As far as the approval process is concerned, the underwriters have to stick to some specific guidelines, aside from computer programs to check the risks that might be associated with your mortgage loan. There are two distinctive ways to find that out – manual underwriting and automated underwriting.
The three main tasks that an underwriter is supposed to perform are – approve, suspend, or deny. As discussed above, an underwriter is that individual who will verify and confirm whether you are eligible to avail of a mortgage or not. Your loan underwriter will look into your past details and your financial history to declare if you are a qualified candidate. Their company will be loaning you some huge bucks and before that’s done, they would like to be completely sure of whether you will be able to shell out the mortgage payments every month.
You already know that an underwriter considers three C’s, namely credit, capacity, and collateral. Credit implies your credit history or your previous payment records. To be practical enough, your credit score is not a substantial piece of information that can reveal your financial condition. Neither does it reflect how much you take in every year or how much currency you have in your bank account. It shows how much debt have you been into, the time, and your ability to shell out payments consistently.
If you have been making your past insurance payments, utility payments, rent payments, or payments for your gym membership on time, you can be considered as a reliable loan candidate. The underwriter needs proof of how good you stand monetarily. Irrespective of whether you are using a manual underwriter or an automated underwriter, you will be required to furnish this information. Assets concern how much do you have in your banks and liabilities concern your pending financial responsibility. To check out the collateral risks, associated with your mortgage, the underwriter requires relevant information and the value of the home you are willing to buy.
The underwriting procedure generally takes a few days to a few weeks. The factors that will be taken into account are your financial condition, your loan type, the issues that are linked to property surveys, and paperwork as well. All these can affect the time your underwriter can take in approving, suspending, or denying your mortgage.
Remember, that the underwriting procedure is a step towards laying your hands on a new property. Though underwriting is a basic step, there are other factors too which come under consideration and can have a great role to play before you close in on your house. So, gather all the basic details beforehand to avoid any disappointment in the future.