Behind the Scenes: Mortgage Loan Underwriting
As a borrower, it can be frustrating to sit back and wait as your loan travels through the lending process. I have traveled through the process twice. The first journey was prior to entering the mortgage industry, and the second occurred after having worked as a loan processor for two years.
The second time around was much less stressful, leaving me to wonder what was the difference? It dawned on me that being on the inside allowed me to see my loan through each step of the process. Working for a mortgage company gave me insight and understanding into each of those steps, which made the process much less stressful.
Now, as an underwriter, I always keep the borrower perspective in mind. Here’s a “Behind the Scenes” look at what is happening with a loan at the underwriting step of the process.
At the initial underwrite, the goal is to thoroughly and completely review the loan and assess risk. This includes a complete examination appraisal, credit report, income documents, and any other documentation or information accompanying the file. This usually takes anywhere from 45 minutes to 2 hours depending on the complexities of the loan.
Once everything has been reviewed and assessed, a list of “conditions” is compiled that are required before putting a final stamp of approval on the loan. This information generally covers a list of items necessary for every loan, such as current mortgage payment verification and a rate lock, or more personal items such as a letter of explanation for a red flag in the file or clearer copies of certain documents. Each item requested is essential to complete the picture of the loan’s profile and risk. This will allow the underwriter to confidently issue an approval.
At the final underwrite, each of the conditions is reviewed that have been fulfilled as a result of the initial underwrite. The digital file is also reviewed to see if any documentation has been added or altered since initial underwrite. At the end of the day, the underwriter’s name is on the approval and it is up to each underwriter to be as thorough as possible to ensure every loan bearing their name both quality and complete. Occasionally, the documentation provided will open more doors than it closes, and additional conditions are issued in order to gain clarity or support the approval. Everything is reviewed with a few main considerations:
- Is the level of risk acceptable to the underwriter, the company, and the investor?
- Is there a benefit of the loan?
- Will an investor be able to piece together the same picture as the underwriter when they are reviewing loan to be serviced?
Once all of the questions have been answered and the items for consideration cleared, the underwriter places their final stamp of approval on the loan, and the loan is headed for the closing table!
The underwriting process can move pretty quickly, but can often be delayed if the documents requested are not provided exactly as requested or at all. Resistance to providing personal information is natural, however an underwriter cannot know what the borrower knows – unless there is open communication – and that information is necessary to issue loan approval.
It is my hope, that this behind the scenes peek will help borrowers understand the steps a loan is following when they cannot be as intimately involved in the process as an industry insider.
Written By: Tiffany Shull, Underwriter at Royal United Mortgage LLC