If you've found new homes for sale that are perfect for you, the next step is to secure financing. Once you submit your application to the lender, the wait can seem endless. It might help to understand a bit about the underwriting process, so read on.
What Is Mortgage Underwriting?
Underwriters do a specialized job, and it's their responsibility to ensure that the lender is not making a mistake in lending someone thousands of dollars to buy a home. They may be directly employed by your lender, or the job might be contracted to an underwriting firm. When you submit your application to your lender, you will be asked for some very detailed information about your finances. The information you supply must be verified before your loan can be approved, so this means the verification of:
- Your income and the source of the income
- Your employment and the length of time you've been employed there (to show financial stability)
- Your credit report and your credit score
- Your bank account balance (to ensure you have enough funds to pay your closing costs and down payment)
Why You Should Maintain Your Credit
It should be mentioned that while underwriting is a single process, mortgage approval is far from a one-and-done sort of event. The credit factors listed above are subject to continuous scrutiny. From the time of your application until you have the keys to the house in your hand, you are monitored. Do not disturb your bank account, change jobs, take out more credit, get behind on paying a bill, or anything else that will cause a change in your credit-worthiness.
How Long Does Underwriting Take?
Mortgage underwriting can take anywhere from a few days to a few weeks. The time differs depending on several factors, such as:
- The lender
- The particular underwriting procedures of a given lender or underwriter
- The backlog of other loans being processed
- The speed at which the application information can be verified
- Whether or not the applicant's loan has issues
Issues With the Approval
If an applicant's information cannot be easily verified, the loan might be approved "conditionally". This means that the underwriter expects the loan to be approved but they are waiting on the resolution of one or more issues. For example, the underwriter may have asked the bank to verify a bank deposit and the bank has not responded yet. The issue is not enough to deny the loan, but the full approval must wait for the bank's response. One fine day, however, you will receive a notice that states you are clear to close.
Speak to your lender or real estate agent if you have questions about the underwriting process.