A home loan is a huge commitment, with your lender taking on risk to let you borrow. As a result, it\u2019s 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.<\/p>\n
Here\u2019s what you need to know about the home loan underwriting process:<\/b><\/p>\n <\/a><\/p>\n The underwriting process is basically a way for your lender to verify your financial situation and evaluate whether you\u2019re an acceptable risk as a borrower. Often, the mortgage underwriting process takes place after you\u2019ve been pre-approved<\/a> for your home loan<\/a>.<\/p>\n 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.<\/p>\n These items can also impact the home loan rates<\/a> you get.<\/p>\n <\/a><\/p>\n 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<\/a> or a 15-year fixed<\/a> loan, you\u2019ll have to go through the mortgage underwriting process.<\/p>\n Not every lender has the same process, but many lenders receive guidance from Fannie Mae and Freddie Mac \u2014 allowing them to sell their loans to these entities for servicing.<\/p>\n The underwriting process includes a review of your credit, especially your credit score, to see whether you meet specific minimums. For example, Fannie Mae requires a credit score of at least 620, using approved scoring models.<\/p>\n An underwriter will also review your credit report for red flags and other issues. Included in the credit review is your DTI, with a requirement for your DTI to be no more than 43%.<\/p>\n Learn More: <\/i><\/b><\/p>\n It\u2019s not enough to say that you have a certain down payment<\/a>. 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.<\/p>\n Additionally, the down payment can\u2019t 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.<\/p>\n An underwriter is also responsible for managing the appraisal process with an independent professional. The home appraisal<\/a> 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.<\/p>\n In the end, if the home appraises for less than the selling price, the deal might not go through \u2014 unless the seller lowers the price or the buyer comes up with more money to make up the difference.<\/p>\n 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.<\/p>\n Find Out: What Are No-Doc Loans? How to Get a No-Income-Verification Mortgage<\/a><\/strong><\/em><\/p>\n It\u2019s not enough to verify your income in the home loan underwriting process. There\u2019s 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.<\/p>\n 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.<\/p>\n The underwriting process typically takes between three to six weeks. In many cases, a closing date for your loan and home purchase<\/a> will be set based on how long the lender expects the mortgage underwriting process to take.<\/p>\n <\/a><\/p>\n When you move forward with getting a mortgage<\/a>, here are the steps of the underwriting process you can expect to go through and about how long each generally takes.<\/p>\n How long it takes: <\/b>One to three days<\/p>\n\n
What is mortgage underwriting?<\/h2>\n
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What to expect during the underwriting process<\/h2>\n
Credit<\/h3>\n
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Down payment<\/h3>\n
Appraisal<\/h3>\n
Income<\/h3>\n
Assets<\/h3>\n
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How long does underwriting take?<\/h2>\n
Steps of the underwriting process<\/h2>\n
1. Get prequalified<\/h3>\n