Being a first-time home buyer means that you are likely learning something new every day. Once you’ve started learning about the process of buying and financing a home, you’ll start to hear terms used casually that you may not understand.
One of the terms that will be thrown around a lot is the term “underwriter,” referring to the person that approves, declines, or suspends your mortgage application. Take a closer look at how the process works to apply for and get approved for a mortgage, and how the underwriter is involved in this equation.
What is an Underwriter
The underwriting in the home financing process is the entity or company, that is responsible for analyzing and assuming the risk of another entity. This is something that happens behind closed doors, taking your mortgage application and putting it through phases of verification, appraisal, title search, flood certification, and survey. The underwriting will either approve your loan, suspend it if you need to supply documentation or decline it if you don’t qualify.
How do they decide on my mortgage application?
Now that you understand what an underwriter does, it’s a good idea to understand how they make their decisions. The underwriter will work on several tasks with your mortgage application, with the main tasks including your credit reputation, your ability to repay the loan, and what collateral you may have to improve your chances of approval.
An underwriter is going to start with the verification process, which involves tasks such as calling your employer to verify salary. Next, the underwriter will make sure that the property’s price is comparable to the prices of similar properties by getting an appraisal. Once the lender has gotten a physical appraisal of the house, they’ll have a title company do a title search to verify the legal history ensuring there are no claims against the house.
From there, a title insurer will need to issue a policy and a flood certification will be needed if it’s found to be in a flood zone. Lastly, a survey is done to have the property’s boundaries verified.
What do I need to know about underwriters
Underwriters are responsible for ensuring you have a solid credit history, you can afford to repay the loan, and whether you have collateral to be used in the event that you don’t repay your loan. These tasks work together to get you approved because lacking in one area can be made up if the other areas are stellar.
It’s important to understand that it is not a quick process for the underwriter to complete these tasks. There are many elements to approving a mortgage. They tend to work for a lender or bank help to make these loan decisions once a sales member brings it to them and they don’t make commission since it would be a conflict of interest.
Are you confused by all of this new home-financing lingo that has become part of your daily life? Start learning them one by one and the process will start to make sense. Your home financing underwriter is the one that needs to make sure you have presented all of the details, have been honest in the process, and have enough credit stability to be trusted with such a large loan. Consider the job of an underwriter and be sure to have these items in tip top shape before deciding to buy a home.