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What is a mortgage underwriter?

You may be wondering, what is a mortgage underwriter? A mortgage underwriter is the person employed by the lender who takes a deeper look into your finances before approving a loan.

For many people, working with an underwriter may sound intimidating, especially if you’re a first-time homebuyer. But underwriters are people, too! So, we've created this article to help you better understand underwriters by describing what they do and what they look for when reviewing your mortgage application.

What does a mortgage underwriter do?

An underwriter will take an in-depth look at your credit and financial background in order to determine if you’re eligible. Through underwriting, the bank, credit union or mortgage lender assesses the probability of whether you’re able to pay back the home loan before approving or denying your mortgage application. A mortgage underwriter assesses the risk when it comes to determining if you can repay the mortgage and makes sure all the information provided is accurate. They will evaluate factors to help better understand your financial situation.

Before the loan gets passed to an underwriter, a home lending advisor, loan officer or mortgage broker will collect the documents that are necessary for your application. They pass this information along to the mortgage underwriter to check your credit history and assess your current financial situation.

The underwriting process, performed by an underwriter, is necessary for getting your mortgage approved. Once you’ve applied for a home loan, your application will typically be organized by a loan processor and then sent to a loan underwriter. The underwriter will determine if you qualify for the mortgage. During the underwriting process, an underwriter will review your mortgage application and decide whether you are likely to be able to repay the loan. Then, the underwriter will approve, hold or decline your mortgage application.

What do mortgage underwriters look for?

There are four major criteria that mortgage lenders and underwriters look for.


One of the first things an underwriter will need to know is how much income you have and how often you’re receiving it. You’ll typically be asked for your W-2s, recent pay stubs and recent bank statements. If you’re self-employed or own a business, your lender may require different documentation. A lender will often verify your employment.


Your lender will order an appraisal of the home you want to buy during the underwriting process. This is to protect you from overpaying and protects the lender from lending more than the home’s market value. The underwriter will determine if the property is one that you can afford and meets the loan standards.


Assets may include your checking and savings accounts, stocks, bonds and more. The more assets you have, especially those considered valuable, the better. Your underwriter will also check if you have cash available for reserves, which helps measure the number of months you could make your mortgage payment if you were to lose your income.


The mortgage underwriter will also review your credit history, as well as your credit score. When examining your credit history, the underwriter will note if you’ve paid your current and past bills on time. The credit score will be used to look for things like late payments, overuse of credit and bankruptcies. Your underwriter will also evaluate your debt-to-income ratio.

What are the most common concerns for mortgage underwriters?

There are potential red flags that may cause a mortgage underwriter to hesitate before approving your loan. These are five things you can look for that might be a red flag for an underwriter:

1. Bounced checks or Non-Sufficient Funds (NSFs) charges

Accounts cluttered with overdrafts of NSFs charges may be alarming to an underwriter. This indicates to the underwriter that you can’t manage your finances — poor financial management can impact the way you manage your mortgage payments.

2. Large deposits without a clearly documented source

Irregular or large deposits into your account could mean that your payments or costs are coming from a source that isn’t yours, like borrowed money from a friend or family member. You’ll have to disclose where the payments came from and ensure that it’s legal. Large deposits, especially from unknown sources, can be risky and will require an explanation.

3. Credit issues

A low credit score or having periods of bad credit could cause some concern. This may make it more difficult to get your loan approved and can leave you with a higher interest rate. Not meeting minimum credit requirements can result in denial. Late payments on credit cards can also be concerning and cause doubts when it comes to making your mortgage payments on time.

4. Employment issues

Gaps in your employment history or frequent job changes may lead to the inability to make timely payments and may be seen as unstable. Career changes may also alter the amount the lender approved for you to borrow.

5. Bankruptcies or foreclosures

Filing for bankruptcy or foreclosure means that you were unable to repay your outstanding debts. They have a negative impact on your credit report and can affect how underwriters see you. If you couldn’t pay your debt then, will you be able to now?

What would cause a mortgage underwriter to deny a loan?

A mortgage loan can be denied in underwriting for many reasons. Reasons why underwriters deny loans can include:

  • Your credit score is too low: Having a low credit score can be an issue for most steps in the homebuying process. This may indicate that you’re a high-risk investment, which means that you may have trouble making payments on time or handling other financial responsibilities.
  • You can’t prove steady income: An important part of your application is your job and income source. Lenders want assurance of timely repayments, so insufficient income could cause your loan to be denied.
  • You have a high amount of debt: A high debt-to-income ratio is a common issue that results in loan denial. Having too much debt can show that you may not be able to handle the mortgage payments.
  • The appraisal is too low: Underwriters can deny a loan if the appraisal comes back lower than the sale price because they can’t lend more than a certain percentage of the appraised value of the home. If this is the situation, you’ll need to pay the difference out of pocket or renegotiate the price.

Sometimes, unfortunately, underwriters will deny a loan. Lenders are required to tell you the reasons you were declined, but if you want more detailed information, ask. Knowing why you’ve been denied can help you take the necessary steps to get approved in the future.

Understanding what a mortgage underwriter does and what a mortgage underwriter looks for can help you as you prepare to apply for a mortgage loan. If you still have any questions or concerns, speak with a Home Lending Advisor to learn more.

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