If you are not in the real estate industry and have purchased a home a few times in your life….like the typical American you may not be familiar with the term…..underwriter. Not underwire….underwriter! If you go down and chat with your local banker friend and she tells you that you can get a 15 year fixed rate mortgage at a GREAT rate (which you can) you may take her up on it. If you do decide to pursue a mortgage they will:
- Ask you to complete a detailed application. The application will ask you to list all of your household income as well as your current debts. They monthly payment and the current balances. This includes credit cards, student loans, vehicle loans etc. You will need to provide a list of all of your assets and their approximate worth as well as the balances of your savings and investment accounts.
- You will need to give them the two most recent pay stubs for each income earner in your household.
- You will need to give them a copy of last years tax return.
- You will need to sign some mandatory disclosures and return them.
- Your lender will obtain a copy of your credit report and FICO score.
- Assuming you qualify for the loan……the UNDERWRITING process will soon begin. So here in lies the question of the day…..What in the HECK is underwriting? Underwriters are responsible for verifying your income and weighing the risk of loaning you the money. Their job is to determine if you are a good risk as a borrower AND if the property is sufficient collateral. That means…..are you likely to pay this loan back as agreed based on your previous financial actions? If you do not pay the loan back as agreed and the bank forecloses on the home can they sell if for enough to cover their losses.
If you’re planning to purchase a home or refinance your mortgage PLEASE plan ahead to be PATIENT with this part of the process. This is where the mysterious part comes in and we all begin to think our mortgage application and file have gone to the abyss. When you call to check on your loan and they say they are waiting for a response from underwriting…..be prepared
You may hear back in 15 minutes or 15 days! Of course some underwriters are better than others but there is no predictability. I often have to remind myself that underwriters are people too and they have lives and families. They read their kids bedtime stories and have challenges and struggles just like I do. I must humanize them because otherwise I might go off all ballistic and that’s nothing anyone should have to see. So if your local friendly banker asks you for documentation that a certain account is paid in full and you provide it to them……don’t pack that document in a moving box. Put it in file marked….”Things the UNDERWRITER asked for but will probably ask for at least 2 more times before this process is over” You are getting the idea. Some smaller, community banks still do their own “in-house” underwriting which is a huge issue to take into consideration as you shop for a mortgage. Not to say that you should not do business with the larger banks who can sometimes off the best rates…..just be prepared and be patient!