A large purchase like a home means a buyer is under close scrutiny by the lender and that includes an examination of the applicant's financial status in great detail. To learn more about what might be happening with your mortgage during underwriting, read on.
Your Offer Has Been Accepted — Now What?
Now, it's time to apply for a mortgage. That task should be performed as soon as possible after the offer has been accepted since you want to have everything settled with the financing well before the closing date. In the initial stages of loan processing, your contact may be a loan representative but later on, your loan packet will be passed on to an underwriter. With your application, expect to also back up all the information with proof of income, savings, employment, etc. You might also be asked to supply income tax returns at some point during the underwriting process.
Your Credit Is Checked
One of the most important aspects of mortgage underwriting is evaluating the ability of the borrower to pay the loan as agreed. To do so, the underwriter will request a copy of your credit report. Not only does the underwriter review your score but they also will be looking for negative marks like late payments, write-offs, court judgments, bankruptcies, and more. Once you apply for a mortgage, be careful not to damage your credit by making large purchases, applying for more credit, or paying any bills late. Your credit is not just checked once — it's checked several times during the underwriting process.
Assets Are Checked
It's important that potential buyers be able to pay the required cash at the closing. Part of the underwriter's job is to ensure that the closing, and thus the loan origination, goes off without a hitch. That means they will be reviewing your down payment and cash reserves targeted for the closing. Don't remove any of that cash from your account once you apply for your mortgage. Wait until it's time to close to remove money.
Your Employment and Income Is Verified
You should expect to provide the underwriter with proof of employment using a pay statement or a letter from the employer. That is often followed up with a phone call for verification of employment and salary.
Your General Financial Picture
Finally, your debt-to-income ratio is checked. That means an evaluation of your other debt obligations as compared to your income and your housing outlays.
To find out more about the underwriting process, speak to a mortgage loan broker.