Understanding the Mortgage Underwriting Process

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Anyone who has bought a home has experienced the mortgage underwriting process; however, few of us know little, if anything, about how it works.

This part of buying a home remains a great mystery––as do the people behind it, but your destiny as a homeowner lies in their hands. Imagine the dark, shadowy banker from the TV show Deal or No Deal.

It’s not as scary as it seems. Read on for a simple breakdown of the mortgage underwriting process.

The Review

While complicated to execute, the concept of mortgage underwriting is simple. This is when a homebuyer’s application is reviewed to determine if they are a good candidate for the loan needed to buy the home.

Once the loan application is processed, it’s reviewed by an underwriter who uses specific guidelines to measure your risk level. The underwriter will review your credit history, income and assets, as well as your down payment and home value.

The Appraisal

One of the nerve-wracking parts of the review process is the appraisal. This is where an independent professional examines the home to determine the home’s value.

The subjective nature of this appraisal can be frustrating for those who believe that an item is worth what someone will pay for it. However, banks thinks differently. The alternative is to find an all-cash buyer, which skips the mortgage process altogether.

The underwriter will also request a copy of the title insurance, which confirms that there are no liens, unpaid taxes or judgments on the property before ultimately giving the thumbs up or thumbs down.

The Approval

If all conditions have been met, the underwriter will hopefully approve the loan without any contingencies. Then, the homebuyer receives a “clear to close” from their lender, telling them their mortgage loan will be finalized on the determined closing day.

Once closing day arrives, the homebuyer will go to the title agency, where they will be met with a stack of papers to sign.

After the final John Hancock is penned, the happy homeowner will receive the keys to their new home, and the mortgage underwriting process is complete. What began as a bit of a mysterious and anxious process ends with a happily ever after!