Most new home buyers finance their purchase, and are at least passingly familiar with the term “home mortgage” and understand that it is basically a lending institution loaning them money to purchase a home. But when they start the process buyers often hear the term “mortgage underwriting” and wonder what exactly that consists of.
What is Mortgage Underwriting Anyway?
Underwriting is simply the process during which mortgage lenders assess the eligibility of potential borrowers. In short, an lender wants to make sure that the borrower meets all their guidelines in terms of debt, income, credit and collateral. The underwriter will also ensure that the borrower meets any secondary guidelines and requirements from institutions such as FHA, VA, Freddie Mac or Fannie Mae.
Mortgage underwriting takes place AFTER you fill out a loan application AND provide supporting documentation verifying the information you put on the loan application.
In general, a borrower begins the process by working with a mortgage broker and/or loan officer first. The loan officer may provide advice on filling out the paperwork along with “do’s and dont’s” during the underwriting process. Once the loan officer has received all the completed paperwork and supporting documentation, the loan is moved to the underwriting stage.
What Does the Mortgage Underwriter Do?
Once the loan file is in underwriting, the underwriter will review all associated paperwork provided with the loan. They will review the applicant’s bank statements, W-2 statement, tax returns, etc. They will also pull the applicant’s credit score, review debt-to-income ratio, verify employment, and ensure all income stated by the application is correct (such as alimony or child support or disability payments.) The underwriter may – and often does – request additional documentation from the borrower to help verify the loan application.
The goal of this process is to make sure the borrower meets all requirements set forth by the lender, the federal government, and the secondary mortgage market.
So How Long Does the Underwriting Process Take here in central Oklahoma?
Closings in central Oklahoma that require a mortgage typically are closed within 30 days of finalizing the contract. The first step once a contract has been signed is for the borrower to complete the loan application and get all the required paperwork to to their loan officer ASAP. This will speed the underwriting process. Once the required paperwork has been gathered and the loan sent to underwriting, we have seen loans underwritten in as little as 3-4 days. More typically there are some type of minor issue with the loan paperwork and the applicant must provide additional paperwork, which delays the underwriting process. In most cases underwriting takes anywhere from 1-2 weeks unless there are major loan application problems. From beginning to end, the closing process here in central Oklahoma takes anywhere from 30-45 days if there is a mortgage involved. Cash closings can happen much quicker.