Overhead view of man and woman in branch office reviewing underwriting documents

What’s underwriting in the mortgage process?

“Clear to close” may be the most popular three words of the homebuying journey. That’s what you’re waiting to hear after you submit your mortgage loan application. “Clear to close” means your loan has received final approval during the mortgage underwriting process, and you’ll soon be moving into your new home after signing the final loan documents. Mortgage underwriting reviews not only the borrower’s situation and history but also the status of the purchase or refinance property. This process measures how much of a risk the borrower and mortgage are to the lender and determines if that risk is acceptable. An underwriter evaluates such things as credit history, assets, employment, income and current debts. They also assess the value and condition of the purchase property. Underwriting doesn’t have to be a mysterious process. Learn the answers to the questions we get asked most about mortgage underwriting, including what underwriters look for in the loan approval process and how long it takes.

The mortgage underwriting process

After submitting a loan application and supporting documents to your loan officer, the loan processor will assemble and verify all of the borrower and property documentation and create a loan file. The underwriter will then do an in-depth review of your loan package, finalizing all of the figures and determining whether or not the loan is clear to close.

What do underwriters look for to approve a loan?

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
  • Assets
  • Capacity to repay
  • Collateral
  • Employment
  • 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.

How long does underwriting take?

Every loan file is different, so the amount of time that underwriting takes varies. The quicker you respond to your lending team with complete and legible documents, the smoother the mortgage underwriting process will be. To learn more about the mortgage underwriting process, contact a loan officer today.

*For full terms and conditions, visit: https://www.guildmortgage.com/cap-hbe-terms/

The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply.

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About the Author: Guild Mortgage

Founded in 1960 when the modern U.S. mortgage industry was just forming, Guild Mortgage Company is a nationally recognized independent mortgage lender providing residential mortgage products and local in-house origination and servicing. Guild’s collaborative culture and commitment to diversity and inclusion enable it to deliver a personalized experience for each customer. With more than 4,000 employees and over 250 retail branches, Guild has relationships with credit unions, community banks, and other financial institutions and services loans in 49 states and the District of Columbia. Guild’s highly trained loan professionals are experienced in government-sponsored programs such as FHA, VA, USDA, down payment assistance programs and other specialized loan programs. Guild Mortgage Company is a wholly owned subsidiary of Guild Holdings Company, whose shares of Class A common stock trade on the New York Stock Exchange under the symbol GHLD.