Mortgage Underwriting Process: What Underwriters are Looking For

If you’re applying for a home loan, it’s the underwriter’s responsibility to ensure that the information you provided your lender is accurate and true. What exactly is an underwriter looking for? In general, they would have to assess and confirm the following:

Your Income

This is the first item that an underwriter must evaluate — specifically, how much you earn and if you get it regularly to determine if you could repay your mortgage. For this, you need to give them two of your latest pay stubs, W-2s from the past two years, and two of your latest bank statements. Self-employed borrowers would need to submit additional documents depending on the lender’s specific requirements. 

Your Credit History

An underwriter must determine your credit rating to see how much you earn against your outstanding debt, which is commonly known as the DTI or debt to income ratio. DTI ratios differ from one lender to another and according to the home loan. In general, Econ Mortgage and other mortgage officers from Salt Lake City say that lending companies are looking for borrowers with lower DTI ratios, as it means that you are likely on top of your finances and could pay off your monthly mortgage payment on time.

You Assets

The underwriter would likewise check your assets such as savings and checking accounts, bonds, stocks, and sale proceeds. The underwriter must confirm that your assets are yours and not borrowed from another person. The underwriter would also see if you have available cash reserves.

Your Property

During the underwriting process, your mortgage lender would order an appraisal of the home you’re planning on purchasing. This would protect you from paying too much for a home and make certain that your lender won’t lend you more than the home’s value.

Essentially, your lender needs to evaluate your willingness and financial capacity to pay off your mortgage. Although willingness isn’t measurable, your financial capacity is. They do this by assessing your income, credit history, assets, and property, during the underwriting process.