The mortgage underwriting process can be complicated for first-time home buyers. Knowing more about underwriting can help make the home purchase process easier and less mysterious. Here's what you need to know.
What are underwriters, and what do they do?
Underwriters are professionals who work for mortgage lenders and determine whether a borrower is qualified to be approved for a mortgage. Underwriters spend time researching your financial history, measuring the risk associated with lending money to you, and recommending to the lender whether an application for a mortgage should be approved or denied. Underwriters must be familiar with the requirements of their lender and federal government regulations.
What factors do underwriters consider when approving a loan?
Many factors come into play when you are trying to get a loan. The requirements vary from one loan type to another, and from one lender to another, so it can be difficult for you to tell from the outset whether you will be approved for a mortgage. However, the following factors are commonly considered and can be a good measure of your ability to get a loan:
Employment history and job stability
In addition, the underwriters will consider how much money you are willing to put down. Sometimes lender requirements are flexible, depending on other qualifications that a borrower meets. For example, if you fall below the minimum credit score requirement, some lenders will still approve a loan if you are willing to pay mortgage insurance and a larger down payment.
How do you apply for a mortgage?
The mortgage application process is complicated, and underwriting is just one step in the larger process. The process goes like this:
Pre-qualification. This first step requires the home buyer to disclose financial information in a question-answer session with a lender. Pre-qualification is a simple procedure that often takes about 15 minutes.
Pre-approval. During this step, you send documentation to the lender to support the financial information given during the pre-qualification process. How long pre-approval takes depends on how much time you take to gather paperwork. The lender may take several days to sort through the documentation.
Offer. Once pre-qualified or approved, you may make an offer on a home. Once the offer is signed, the escrow process begins.
Escrow process. During the escrow process, you will get an appraisal of the home, sign up for homeowner's insurance, perform a title search, and complete other tasks required by the lender.
Underwriting. Underwriting is complete after all other escrow processes are finished and documentation has been gathered.
Closing is the final step of the mortgage approval process, where the underwriter gives final approval, and you sign all the paperwork for your loan.
How long does underwriting take?
Underwriting can take from a few days to a few weeks, depending on the complexity of your financial situation and what the lender uncovers when the underwriting process begins.
Underwriting can also take longer if underwriters are processing many applications, such as occurs at the height of the summer, when many people are buying homes.
Home buyers who are waiting for their home purchase to close can feel frustrated by the underwriting process, the completion of which can be a moving target. Home buyers and sellers must remain flexible throughout the home purchase process.
What happens when underwriting is finished?
If you are approved for a mortgage, the documents are drawn up and signed at the escrow office. At this point, money exchanges hands from you to the seller, closing fees are paid, and you are given the keys to the house. Usually the seller has all belongings out of the house by the time escrow closes, so you are free to move into the house at that time.
What happens after your purchase your home?
Once you've purchased a house and have built up equity, you might be wondering, “what’s next?” Maybe you want to add a new room or upgrade your kitchen to add value to your home. Perhaps you need to repair a bathroom or start another home improvement project. How do you pay for it?
One option is to getting a HELOC Figure. We offer a simple, easy to complete process to apply. Instead of essentially repeating the entire process as described above, you just complete a simple online application form. It only takes minutes to complete, and you can have your application closed in days.
If you’d like to learn more, check out our mortgage refinance information page.