Understanding Mortgage Underwriting

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(Free-Press-Release.com) June 10, 2011 -- What is Mortgage Underwriting?

Mortgage Underwriting is the process which follows the receipt of the mortgage form by the loan endorser. Mortgage Underwriting is the most intricate procedure in the loan granting process. In the Mortgage Underwriting process, the financial status of the applicant is scrutinized by the loan endorser. The applicant is required to submit documents that substantiate his integrity, based on which the mortgage underwriter studies the prospect of the mortgage applicant as being suitable. The complete procedure can take anything between a few hours to a couple of weeks.

Credit scoring and electronic underwriting help to hasten the Mortgage Underwriting process, yet, the final authority in the decision making is the mortgage loan underwriter. A complete financial background check is carried out on the borrower, but the main aspects that decide his standing are the various sources of income, debt obligations if any and the money for closing the loan.
What Does Mortgage Underwriting Involve?

Mortgage Underwriting involves a close study of the applicant’s monthly debt requirement and monthly housing expenditure. The job of the loan underwriter is to review the taxes and fees the applicant has to pay each month. Taking all these factors into account, the loan underwriter calculates the percentage of the applicant’s income that goes into his housing expense. Next, the applicant’s income to debt ratio is worked out. Debts that continue for long periods are also studied, along with the applicant’s financial ability to close the debts.

The deciding factor of the applicant’s credibility is his source of income and is a major factor. An applicant can have more than one source of income if he has different businesses or if he rented out property and is getting rent from it as well as drawing a salary from a job, these are all considered as source of income. In case of the applicant having a co-applicant, the sources of income of both individuals are analysed.

The loan underwriter also checks if the income source will continue to be in existence through the closing of the loan period. This is to ascertain that the applicant has the means of closing the loan. The source of income can be a business, a job or monthly rent. However, a change of job or change in business during the time of the loan underwriting can put a spoke in the underwriting procedure.

Getting a mortgage loan is not as simple as it sounds. Even if the applicant meets the criteria of the required financial status, the mortgage loan may not be granted. The applicant’s employment records are verified to see if he has any history of being without a job for long periods of time. Further, the applicant’s bank profile and past record of debt repayments are scrutinized by the loan underwriter. The loan underwriter verifies if the applicant has had had a foreclosure or any instance where he was unable to pay tax.

Other than the documents submitted along with the application the applicant may have to furnish some more documents at the underwriter’s instance. Only after a close scrutiny of all the documents will a loan is passed.

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