Summary: This article provides a basic overview of the mortgage underwriting process in Washington and Oregon, our two primary areas of operation.
Underwriting: The ‘Middle’ of the Mortgage Process
Most home buyers and borrowers understand how the mortgage lending process starts and finishes. It begins with a loan application, and it ends with the actual funding of the loan. It’s the middle part that can be a mystery for some.
Mortgage underwriting could be considered the “middle” part of the process. It takes place after the application has been completed, and before the actual funding. It’s also an important part of that process.
But what happens during the underwriting stage? Who is the underwriter? What does he or she actually do? And what can you do, as a borrower, to ensure that everything goes smoothly? Here’s what you need to know.
What Does the Underwriter Do?
Within a bank or mortgage company, the underwriter is the person responsible for analyzing the loan to determine if it is acceptable. Underwriters are concerned with the risk associated with each mortgage loan that they review. Underwriting is a common practice used across the financial industry. It’s not limited to mortgage lending.
Underwriters essentially perform a kind of risk analysis. They want to ensure that a borrower has the means to repay the loan, for obvious reasons. They also ensure that mortgage loans meet all of the requirements set forth by any relevant housing agencies, such as FHA or Freddie Mac.
To assess the level of risk associated with a certain loan, a mortgage underwriter will look at several factors. These include the borrower’s ability to repay the loan, the borrower’s credit score and history, the loan-to-value ratio, and other factors.
If everything checks out, the underwriter will eventually determine that the loan is “clear to close.” This means that the borrower can move forward into the closing stage, and that the loan can be funded.
What Should the Borrower Do at This Stage?
That’s a basic overview of the mortgage underwriting process in Washington and Oregon. In fact, that’s how it works in most states across the country. Underwriting procedures are mostly standardized and consistent, regardless of where you’re buying a home.
The question is, what can you as a borrower do to ensure that things go smoothly?
While much of the underwriting process is out of your hands, there are some things you can do to help keep things on track. Communication is important. Make sure you stay in touch with your loan officer during the underwriting stage.
Also, if you receive requests for additional documents or information, try to provide those items as soon as possible. This will help keep things on track so you can close on time.
In some cases, a mortgage underwriter will determine that he or she needs additional documents relating to the borrower’s finances. They might also request a letter of explanation relating to a certain bank deposit, a withdrawal, or some other financial transaction. Again, communication is the key to success during this stage. If you receive such a request, try to handle it in a timely fashion. Remember, everyone wants the loan to close!