Each lender establishes its own mortgage underwriting guidelines. Depending on the type of loan that you’re seeking, other guidelines may come from government agencies. For example, suppose you’re applying for an FHA loan. In that case, the Federal Housing Administration issues specific guidelines regarding credit scores and down payment criteria.
During the mortgage underwriting process, the underwriter may ask for additional documents and letters of explanation. Underwriters assess factors such as:
- Credit history
- Capacity to repay
- Income and current debts
- Value and condition of the purchased property
There’s a difference between loan pre-approval and final approval. Pre-approval happens before you begin your home search. During pre-approval, your lender will check your credit and look at your earnings, debts and savings. Pre-approval gives you direction on what homes you may be able to afford. However, a pre-approval letter doesn’t guarantee that you’ll receive financing for a home loan. You’re not approved until your mortgage application has final approval from the underwriter.
When shopping for a home, customers want to know that they’re working with partners they can trust throughout the process. Under Guild’s Credit Approval Protection* program, if Guild issues a preliminary credit approval from underwriting but is unable to close the transaction, the company will pay up to $1,000 for inspections, appraisals or relocation expenses incurred for the home purchase.