Mortgage underwriting process — how does it work?

Mortgage underwriting process—How long does it take?

Mortgage underwriting process — how does it work?

Once you’ve submitted your application, a loan processor will gather and organize the necessary documents for the underwriter. A mortgage underwriter is the person that approves or denies your loan application.

Let’s discuss what underwriters look for in the loan approval process. In considering your application, they look at a variety of factors, including your credit history, income and any outstanding debts.

This important step in the process focuses on the three C’s of underwriting — credit, capacity and collateral.


One of the most important factors in the mortgage approval process is your credit history. The underwriter will review your credit report to see how well you made payments on, or paid off car loans, student loans and other lines of credit. They look for clues that will help them predict your ability to pay back what you borrow.


When trying to determine whether you have the means to pay off the loan, the underwriter will review your employment, income, debt and assets.

They’ll look at your savings, checking, 401k and IRA accounts, tax returns and other records of income, as well as your debt-to-income ratio.

They want to see that you, and any co-borrowers, have the ability to make the payments both now and in the future.


Using the current market value of the home, the underwriter will make sure it serves as ample collateral for the loan. This assures the lender that they can recover the unpaid balance in the case of a default. The underwriter may use an appraisal or other form of valuation to assess the home’s worth.

A valuation of the property is required to confirm the home’s value aligns with the purchase price. The value of a home is determined by the size, location, condition and features of the property. Comparable homes in the neighborhood also help conclude its value.

Getting a valuation, such as an appraisal protects both buyer and lender by ensuring you only pay what the home is worth.

If the home is worth less than the asking price, you may have to bring more money to the closing, negotiate a lower price or walk away altogether.

The lender wants to be sure that your loan doesn’t exceed the property’s value so that in the event of default, they can recoup the money loaned to you.

Step 4: Protect your investment

Title insurance and homeowner’s insurance are two useful measures that help protect your investment.

A look at the property history gives you peace of mind about what you’re buying and helps reduce the risk of future title problems. The title search ensures there are no liens, claims, unpaid taxes, judgments or unpaid HOA dues on the property. Once the title search is complete, the title insurer will issue an insurance policy to guarantee the accuracy of the research.

Proof of homeowner’s insurance will also be required. You’ll need to provide a copy of the insurance declaration page and either a paid receipt or an invoice for 12 months of coverage.

The underwriter has the option to either approve, deny or pend your mortgage loan application.

  • Approved: You may get a “clear to close” right away. If so, it means there’s nothing more you need to provide. You and the lender can schedule your closing. However, if your approval comes with conditions, you’ll need to provide something more, such as a signature, tax forms or prior pay stubs. The process may take a little longer, but nothing to worry about if you’re prompt in responding to any requests.
  • Denied: If an underwriter denies your mortgage application, you’ll need to understand why before deciding on next steps. There are many reasons for the denial of an application. Having too much debt, a low credit score or not being eligible for a particular loan type are some examples. Once you know the reason for the decision you can take steps to address the issue.
  • Decision pending: If you don’t provide enough information for the underwriter to do a thorough evaluation, they may suspend your application. For example, if they can't verify your employment or income. It doesn’t mean you can’t get the loan, but you’ll need to provide further documentation for them to decide.

Congratulations — you’ve made it to closing day! At least three days prior to closing you’ll receive a Closing Disclosure (CD) from your lender. It includes the loan terms, your projected monthly payments and your final costs. Review this document carefully, especially the funds you need to bring to closing, and if you have any questions, ask your lender.

You’ll also make arrangements for your down payment and closing costs. Plan to bring a photo ID and a cashier’s check for your closing costs with you to your closing. At your closing, you’ll sign the final paperwork, pay any closing costs that may be due and get the keys to your new home.

Each situation is different, but underwriting can take anywhere from a few days to several weeks.

Missing signatures or documents, and issues with the appraisal or title insurance are some of the things that can hold up the process.

Be very responsive to requests for information, and if you need more time to gather requested documents, continue to communicate status with your mortgage loan officer.

Use these helpful tips for a smooth underwriting process

Your lender handles much of the underwriting process for you. But there are things you can do to make sure your experience is a positive one.

Keep your debt in check

While your loan is processing, avoid taking on new debt or making other financial changes closing credit cards or other accounts. Anything that affects your debt-to-income ratio may impact your mortgage approval.

Stay in touch with your lender

During the underwriting process, there may be questions or the need for more information. Responding promptly to these requests will keep your application moving forward. Our online loan application makes it easier for you to gather the information they need while staying connected with a trusted mortgage loan officer throughout the process.

Be honest about your finances

There’s no hiding it if you’re not truthful about your income, credit history or assets. Instead, include notes and explanations for anything that may stand out on your credit report or statements, such as a missed payment. It’s a simple thing you can do to help the underwriter make a quicker decision.

Knowing what to expect during the mortgage underwriting process can make it easier to navigate. The more prepared you are, the better off you’ll be. So, keep your debt in check, stay in touch with your lender and be honest about your finances. All these steps will bring you closer to becoming a happy homeowner.


How Does the Mortgage Underwriting Process Work?

Mortgage underwriting process — how does it work?

Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as “Credible.”

A home loan is a huge commitment, with your lender taking on risk to let you borrow. As a result, it’s common for a mortgage underwriting process to be in place to verify your income and assets. This process can ultimately impact whether your home purchase goes through.

Here’s what you need to know about the home loan underwriting process:

What is mortgage underwriting?

The underwriting process is basically a way for your lender to verify your financial situation and evaluate whether you’re an acceptable risk as a borrower. Often, the mortgage underwriting process takes place after you’ve been pre-approved for your home loan.

While your home is under contract, underwriters will go through all of your information and documentation and decide whether to go through with the transaction.

These items can also impact the home loan rates you get.

What to expect during the underwriting process

Underwriters go through everything about your financial situation to determine whether it makes sense to make such a large loan to you. Whether you get a 30-year fixed or a 15-year fixed loan, you’ll have to go through the mortgage underwriting process.

Not every lender has the same process, but many lenders receive guidance from Fannie Mae and Freddie Mac — allowing them to sell their loans to these entities for servicing.

Down payment

It’s not enough to say that you have a certain down payment. The underwriting process includes reviewing where you got the down payment money from. An underwriter will look at your bank statements and assets, and might even verify the deposit with your institution.

Additionally, the down payment can’t be a loan, and if you get a portion of the down payment from someone else, they must confirm that the money is a true gift.


An underwriter is also responsible for managing the appraisal process with an independent professional. The home appraisal must include the market value of the home and there are specific requirements that must be met to be compliant with guidelines from Fannie Mae and Freddie Mac.

In the end, if the home appraises for less than the selling price, the deal might not go through — unless the seller lowers the price or the buyer comes up with more money to make up the difference.


To determine that you have adequate income to make mortgage payments, the underwriting process requires income verification.

Fannie Mae has underwriting guidelines that spell out how to verify employment income with pay stubs, as well as how to evaluate commissions, self-employment, and even secondary employment.

An underwriter might even go through your tax returns and look at different schedules to determine the true status of your income.

Find Out: What Are No-Doc Loans? How to Get a No-Income-Verification Mortgage


It’s not enough to verify your income in the home loan underwriting process. There’s also an asset assessment designed to figure out if you can afford the down payment, or if you have an adequate reserve to make payments.

Underwriters look at your bank accounts, investment and retirement accounts, real estate holdings, and anything else that might be of significant value. Underwriters also look at your loans and other liabilities and how they impact your overall picture.

How long does underwriting take?

The underwriting process typically takes between three to six weeks. In many cases, a closing date for your loan and home purchase will be set how long the lender expects the mortgage underwriting process to take.

Steps of the underwriting process

When you move forward with getting a mortgage, here are the steps of the underwriting process you can expect to go through and about how long each generally takes.

1. Get prequalified

How long it takes: One to three days

Before you think about buying a house, talk to a few lenders about what you might be able to borrow. You can figure out how much home you can afford and get an idea of rates. A lender can usually provide prequalification information in less than a day using basic income and credit data. However, sometimes it can take up to two or three days to get prequalified.

Credible can help you compare mortgage rates from multiple lenders faster — you can see your prequalified rates from our partner lenders in the table below in just a few minutes.

2. Home appraisal

How long it takes: Two days to one week

Your home appraisal is a huge part of the underwriting process and is usually a contingency in the purchase agreement. The physical house inspection typically takes less than three hours, but it can take a couple of days to a week before the appraisal is sent to your lender.

3. Income and asset verification

How long it takes: Three weeks or longer

During the underwriting process, usually as the home appraisal is taking place, your income and assets will be verified. This can take three weeks or longer, depending on how you respond to inquiries and the complexity of your situation.

For example: If you have self-employment income and have to go through an income audit, it could take three or four weeks to complete this step.

4. Apply and wait for a decision

How long it takes: One to two days to apply; up to 60 days for the decision

You’ll also be officially applying for the mortgage loan and waiting for a decision. Getting everything together and applying can take one or two days, since these are complicated applications. The decision can take a while, including up to 60 days, depending on other factors.

Read More: 5 Types of Mortgage Loans: Which One Is for You?

5. Clear contingencies

How long it takes: One to two weeks

If there are contingencies on the purchase agreement, such as loan approval or a home inspection, these all need to be cleared before closing. Depending on the timeline, it can take one to two weeks (or longer) to clear contingencies.

6. Close on the home

How long it takes: 45 days

As long as everything is in place, you can expect to close on the home within two months from the date of your purchase agreement. The average time it took to close on a home purchase in August 2020 was 45 days, according to a report by mortgage technology company Ellie Mae.

The actual closing only takes a couple of hours if all of the paperwork is in order and escrow can be verified.

Tips for the underwriting stage

When going through the mortgage underwriting process, you can make sure things happen as quickly and smoothly as possible by:

  • Not applying for other credit lines: Additional credit inquiries can impact your score, and adding new credit lines can change your DTI. Getting new credit and loans in the middle of the underwriting process can result in denial.
  • Responding quickly to questions: If the lender has questions, answer them quickly. Any delay in your response could push out your closing dates.
  • Providing all documentation: Give the lender all the documents they ask for, whether that’s bank statements, tax returns, or letters from others affirming a gift of a down payment. Without the documentation, your closing could be delayed or your application denied.
  • Being upfront about finances: Don’t try to hide financial issues. Be forthright. The underwriting process will uncover issues, and you’ll have less trouble if you’re honest in the beginning so the lender can work with you.

Credible makes comparing multiple lenders quick and easy — you can see your rates from our partner lenders in the table below in three minutes.

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5 Steps In The Mortgage Underwriting Process

Mortgage underwriting process — how does it work?

If you’re most people who buy a home, you take out a mortgage to finance the purchase. The process that lenders use to assess your creditworthiness is called underwriting. Here is what you need to know about this important step.

Automated underwriting vs. manual underwriting

A mortgage underwriter can assess your loan application manually or run it through a software program, known as automated underwriting, to determine whether to approve you for a loan.

Automated underwriting is usually completed faster than manual underwriting, but since a computer is doing the evaluating, it has some limitations that might not make it ideal for borrowers with unique circumstances, such as inconsistent income. In these cases, it can be easier to qualify a borrower through manual underwriting as opposed to an automated system.

Sometimes, too, lenders use a combination of automated and manual underwriting in order to gauge risk.

What does a mortgage underwriter do?

A mortgage underwriter’s job is to assess delinquency risk, meaning the overall risk that you would not repay the mortgage. To do so, the underwriter evaluates factors that help the lender understand your financial situation, including:

  • Your credit score
  • Your credit report
  • The property you intend to buy

The underwriter then documents their assessments and weighs various elements of your loan application as a whole to decide whether the risk level is acceptable.

Here’s an example from Fannie Mae’s underwriting guidelines. Say a given lender typically requires the following to approve a mortgage:

  • Maximum loan-to-value (LTV) ratio of 95 percent
  • Credit score of 680 or higher
  • Maximum debt-to-income (DTI) ratio of 36 percent

If an applicant falls short in one area, the loan might still be approved the strength of other factors, such as:

  • LTV ratio
  • Credit score
  • Whether you will occupy the property
  • Amortization schedule
  • Type of property and how many units it has
  • DTI ratio
  • Financial reserves

So, if you had a higher DTI — say 40 percent — you might get approved for a mortgage as long as you have a better credit score. If your LTV ratio was lower than 95 percent, you might be able to get mortgage approval even with a lower credit score, 620.

The mortgage underwriting process can take anywhere from a few days to a few weeks, depending on whether the underwriter needs additional information from you, what demand is for the lender and how streamlined the lender’s practices are.

Keep in mind, however, that underwriting is just one part of the overall lending process. You can expect to completely close on a loan in 40-50 days.

Applying for a mortgage: What to expect

When you submit a mortgage application to a lender, you’ll need to include extensive financial documentation, such as W-2 forms, pay stubs, bank statements and tax returns.

When underwriting the application, the lender might come back to you with questions about these documents or requests for additional information.

Responding to these requests quickly will help speed up the mortgage underwriting process.

Here’s an overview of the steps to getting a mortgage:

1. Getting prequalified

Your very first step — even before you start looking for a house — should be to get prequalified or preapproved for a loan. To determine whether you’re prequalified, a lender will review your basic financial information, such as your income and your debts, and run a credit check. Getting prequalified will help you determine what kind of mortgage fits your budget.

Keep in mind that getting prequalified and getting preapproved mean two different things.

In general, a preapproval serves as confirmation from a lender that you’ll be approved for a certain amount of financing — provided your financial situation doesn’t change — while prequalification is simply an indication you could be approved for a loan. Obtaining a preapproval usually requires you to furnish more information to the lender compared to a prequalification.

2. Income verification

Be prepared to have your income verified and provide other financial documentation such as tax returns and bank account statements.

Your lender will confirm your information, and, if you’re deemed qualified, will issue a preapproval letter stating that it is willing to lend you a certain amount the information you provided.

A preapproval letter shows the seller that you’re a serious buyer and can back a purchase offer with financing.

Use Bankrate’s mortgage calculator to figure out how much you need.

3. Appraisal

Once you’ve found a house you that fits your budget and have made an offer on it, a lender will conduct an appraisal of the property.

This is to assess whether the amount you offered to pay is appropriate the house’s condition and comparable homes in the neighborhood.

The cost of the appraisal will vary from a few hundred dollars to over a thousand, depending on the complexity and size of the home.

4. Title search and title insurance

A lender doesn’t want to lend money for a house that has legal claims on it. That’s why a title company performs a title search to make sure the property can be transferred.

The title company will research the history of the property, looking for mortgages, claims, liens, easement rights, zoning ordinances, pending legal action, unpaid taxes and restrictive covenants.

The title insurer then issues an insurance policy that guarantees the accuracy of its research. In some cases, two policies are issued: one to protect the lender and one to protect the property owner.

5. Underwriting decision

Once the underwriter thoroughly reviews your application, the best outcome is that you are approved for a mortgage. That gives you the all-clear to proceed to closing on the property.

However, you might receive one of these decisions instead:

  • Denied: If your mortgage application is denied, you’ll need to understand the specific reason for the denial to determine your next steps. If the lender thinks you have too much debt, you might be able to lower your DTI ratio by paying down credit card balances. If your credit score didn’t make the cut, recheck your credit report for mistakes and take steps to improve your score. Possibly you could apply again in a few months, apply for a smaller loan amount or try to assemble a larger down payment to compensate.
  • Suspended: This might mean some documentation is missing from your file, so the underwriter can’t evaluate it. Your application could be suspended if, for example, the underwriter couldn’t verify your employment or income. The lender should tell you whether you can reactivate your application by providing additional information.
  • Approved with conditions: Mortgage approvals can come with conditions such as additional pay stubs, tax forms, proof of mortgage insurance, proof of insurance or a copy of a marriage certificate, divorce decree or business licenses.

Once you clear any conditions and get your mortgage approved, your home purchase is almost complete. The final step is closing day, which is when the lender funds your loan and pays the selling party in exchange for the title to the property. This is when you’ll sign the final paperwork, settle any closing costs that are due and receive the keys to your new home.

1. Have your documents organized

The best way to keep the mortgage underwriting process on track is to have all of your financial documents organized before you apply for a loan. If you have to request paperwork from a specific account holder, for instance, do so as soon as possible.

It can be smart to put together a file that includes the following:

  • Employment information from the past two years (if you’re self-employed, this includes business records and tax returns)
  • W-2s from the past two years
  • Pay stubs from at least 30 to 60 days prior to when you apply
  • Account information, including checking, savings, money market, CDs and retirement accounts
  • Additional income information, such as alimony or child support, annuities, bonuses or commissions, dividends, overtime, a pension or Social Security

In addition, if you plan to use gifted funds for a down payment, it’s important to have those funds in your possession (in other words, in an account in your name) well before you apply. You’ll also need to have a gift letter to verify that the money is indeed a gift. Doing both can help you avoid unnecessary setbacks in underwriting.

2. Get your credit in shape

A lower credit score can make it more difficult for you to get approved for a mortgage, and can also make your loan more expensive with a higher interest rate.

If your credit score needs improvement, commit to paying down debt and try to keep your credit utilization ratio below 30 percent.

With less debt, especially, your DTI ratio will be lower — many lenders look for 36 percent or less.

In addition, check your credit report to ensure there are no errors that could be negatively impacting your score. You can get a copy from the three major credit bureaus. If you do find a mistake, contact the agency to dispute it as soon as possible.

3. Make a larger down payment

A higher LTV ratio indicates the lender could lose a lot more money if you default on the mortgage. You can reduce your LTV by paying a larger down payment upfront.

If you put 10 percent down on a $200,000 home, for example, you’d have to take out a $180,000 loan, putting your LTV ratio at 90 percent. If you were to put 20 percent down for the same home, you’d only need a $160,000 mortgage, and your LTV ratio would be 80 percent. This lowers the risk for the lender overall, making you a more attractive candidate for a loan.

You can work to save more for a down payment, or ask family or friends for help, if possible. There are also many down payment assistance programs, including deferred payment loans and grants, that can help, and your lender might offer their own assistance in addition to that. Chase Bank, for instance, offers up to $3,000 towards your down payment if you meet certain criteria.

Getting started

If you’re looking to get a mortgage and have all of your documents in order, you’re ready to start comparing loan offers. Ideally, you’ll want to find the loan with the lowest interest rate and fees and the most favorable terms.

As you shop around, consider what type of loan will suit your situation — some mortgages are better for lower-income borrowers, for instance, or those with poorer credit — in addition to how long you plan to stay in the home and what you can reasonably afford.

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