how the mortgage underwriting process works

How to Ensure a Smooth Underwriting Process

If you’ve ever gotten a mortgage, you know about underwriting.

At least you should.

Every loan that is processed has to go through it before it can be approved.

In this article, we are going to explain the mortgage underwriting process and provide you some tips to make it run smoothly.

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What is mortgage underwriting?

Mortgage underwriting is a process in which the lender uses to access risk and ensure a borrower meets all of their minimum requirements for a home loan. There are many mortgage documents required to close on a loan. A loan underwriter makes sure all documents are present and accurate; this is the mortgage industry standard.

The loan officer will build a file for the borrower, including all required documents which are turned into the underwriter for the final loan approval. If the file is rejected by the mortgage underwriters, it is kicked back to the mortgage broker or loan officer to gather the required information.

After the housing market crash of 2008, the Consumer Financial Protection Bureau, CFPB, enacted the Dodd-Frank Wall Street Act, which more heavily regulated the lending industry. The underwriting process is as strict as it’s ever been.

What does an underwriter do?

The mortgage underwriter’s job is to access risk. All of your documents are reviewed. W2’s, tax returns, pay stubs, credit reports, home appraisal, etc. They look at your DTI, verify borrower income, and much more.

Your credit history is heavily investigated for any potential red flags. If you have a late payment or a collection account, the underwriter will require additional information.

Based on the mortgage lender rules, the underwriter may require a letter of expiation for any negative accounts, or require you to pay off certain collection accounts before you get clear to close. Credit is one of the more common reasons an underwriter kicks back a mortgage application.

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Mortgage underwriter checklist

  • Check credit history
  • Check home appraisal
  • Title search
  • Home survey
  • Verify income
  • Verify employment
  • Debt to income ratios
  • Make sure all the required documents are present
  • Ensure any conditions are met
  • Verify savings and down payment

Home Survey

The property survey is a record of the placement of the home and the property lines. A survey is also referred to as a cadastral survey. The underwriter will make sure the survey is present, and there are no issues. If no survey is present, the underwriter will kick the loan file back to the loan officer to get the survey.

Title Search & Insurance

The title company will perform a search on the title of the home to make sure there are no liens, claims, unpaid taxes, judgments, or unpaid HOA dues on the property.

The title company will also buy an insurance policy on the title to guarantee the title is clear and free. The underwriter will have copies of the title insurance policy included in the loan file.

The Home Appraisal

A home appraisal is always required before closing. They want to make sure they are not lending you more money than the home is worth. The appraisal sets the market value of the home. The lender uses the appraisal to figure the loan to value ratio.

How long does underwriting take?

FHA loans typically have more stringent loan underwriting requirements and can take longer to pass than a conventional mortgage. Loan underwriting on an FHA loan can take anywhere from a few days to a few weeks to complete.

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The time depends on a few factors. Having an experienced loan agent who knows everything the underwriter will ask for beforehand can ensure quick underwriting.

If your loan officer didn’t request all the documents needed, the mortgage underwriter will have a long list of documents needed and will delay the underwriting process.

The Average Time it Takes to Close on a Home

According to Fannie Mae, in 2019, the average purchase mortgage took 46 days to close. The average closing time for a refinance was 49 days; these numbers are about five days longer than they were a year ago. Mainly because the lending industry is more heavily regulated. If all goes well, you can expect to close on your home within 45 days.

How to ensure a speedy underwriting process

  • Have all of your mortgage documents at the beginning stage of the process
  • Do not apply for any other types of loans or credit
  • Respond to any requests by the lender quickly
  • Be upfront and honest
  • Be proactive, call your loan agent frequently
  • Provide tons of documents (more information is better than not enough)

What are “conditions” underwriters require?

When a loan application goes through underwriting and does not pass, it is denied kicked back. The underwriter may require certain conditions that need to be met in order to get final approval. If your lender requires conditions, don’t worry, this is a common occurrence.

Some of these conditions may be paying off an account, providing extra bank statements, or other documents. Once these conditions are met, the loan is approved; this is also called conditional approval.

Automated Underwriting

Fannie Mae and Freddie Mac are the two largest Government-sponsored buyers of mortgage loans in America. Banks and lenders approve loans according to their guidelines. The mortgage underwriting process is automated by a computer initially.

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The loan application and all documents are fed into the computer. Based on a formula, the computer will spit out a loan approval or denial. The computer offers a black and white approval system. If your loan is straight forward, you have perfect credit, large down payment, and a low DTI ratio, the computer may issue an automated approval.

However, if you have credit issues or income that needs to be explained to a person rather than a computer, then you may get denied by the automated underwriter. This is where manual underwriting comes into play.

Manual Underwriting

Since computers can only go by the facts, many loans are initially denied by the automated system. When this occurs, the loan application is sent to see if the loan meets the underrating guidelines. FHA loans, in particular, are often manually underwritten because they allow borrowers to have bad credit or low income and still qualify for an FHA loan.

When a loan app goes to a manual underwriter, you’re dealing with a person, not a computer. Any exceptions or conditions are able to be pushed through manually. Remember, if your loan officer tells you that your loan is going to manual underwriting, don’t be too concerned. This is common, especially for FHA and other Government-insured mortgages like VA and USDA loans.


| (Feb 26, 2014) What Is an Underwriter: The Unseen Approver of Your Mortgage Retrieved from (June 5, 2015) 5 key steps in the mortgage underwriting process

Wikipedia | (March 31, 2017) Mortgage underwriting in the United States

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