For most homebuyers, securing financing through a mortgage loan is the best option to purchase a property. Getting an overall idea of the mortgage underwriting process can help you when working with a mortgage lender and can help you prepare for each step of the journey.
What is mortgage underwriting?
After you send in a mortgage loan application, it goes through the underwriting process. Your lender reviews key pieces of information to determine if you’re financially able to pay them back for the loan.
A mortgage underwriter reviews your credit score, credit history, employment information and assesses the mortgage loan amount to see if it’s worth the investment for the lending company.
Tell me the steps of the mortgage underwriting process
There are 5 main steps to the mortgage underwriting process. Theses include:
- Getting your loan application preapproved.
- Verification of your assets and income.
- Appraisal for qualification.
- Verification of no titles on the property and title insurance.
- Final decision to approve or deny the mortgage application.
How strict is mortgage underwriting?
Overall, an average of 7 to 14 percent of mortgage applications are denied yearly. Most lenders abide by Fannie Mae and Freddie Mac guidelines during the lending process. Government backed loans such as an FHA or VA loan adhere to regulations of the Federal Housing Administration.
Sometimes, lenders will implement their own regulations on top of the standard ones in response to economic factors or other conditions, which is called an overlay.
Getting approved or a loan gives homebuyers more freedom when making a property purchase. By reviewing the underwriting process, you can prepare needed documentation and get a better idea of the timeline for approval.
About the Author
Kyung Kim
Hi, I'm Kyung Kim. I immigrated from South Korea to the United States in 1968 when I was 7 years old. I have seen my mom struggle with the English language and work hard to raise her four kids by herself. Still to this day, I don't know how she pulled it off, but she bought her first home in 1979 for $70,000 and because of that decision, she was able to live without worrying about her financial future. I want that for everyone, to feel the pride of home ownership and to build their financial wealth using real estate as part of their financial portfolio. I feel so blessed to play a small role in helping others reach this goal.
I live in Beaverton with my husband, Richard. My mom, who lived with us for several years, passed away in our home in February 2022. Her first home purchase in 1979 made it possible for her to live to the very end, without worrying about her finances. As of August 2022 with a little downpayment assistance, our four children own their own homes. Being in real estate, I quickly realized that if they didn't buy now, they may be priced out of the market in the future. Whether that would have been the case, we will never know, but what we do know is that they are all realizing some good, healthy appreciation in their home values.
As passionate as I am about people owning their homes, I'm also passionate about giving back to our community. I support Compassion First, a non-profit organization that provides aftercare for sex trafficked girls in Indonesia. My husband and I also feel called to financially support social injustice organizations.
I'd love to assist you. Whether you're in the research phase at the beginning of your real estate search or you know exactly what you're looking for, you'll benefit from having a real estate professional by your side. I'd be honored to put my real estate experience to work for you.
