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What is a mortgage underwriter?

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    You may be wondering, what is a mortgage underwriter? A mortgage underwriter is an individual employed by the lender who takes a detailed look into your finances before making a credit decision on your loan.

    We've created this article to help you better understand the role of the underwriter by explaining what they look for when reviewing your home loan 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 your eligibility. During this analysis, the bank, credit union or mortgage lender assesses whether you qualify for the loan before making a decision on your application. They assess the risk, ensure all the information provided is accurate, then will evaluate factors to help better understand your financial situation.

    Before the loan is submitted to an underwriter, a home lending advisor, loan officer or mortgage broker will collect the necessary documents for your application. This information is then sent to the underwriter for review.

    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 the frequency in which it's received. You’ll typically be asked to provide your W-2s, recent pay stubs or Leave and Earnings Statement (LES) and recent bank statements. If you’re self-employed or own a business, your lender may require additional documentation such as Federal Income Tax returns. In addition, the lender must verify your employment.


    If an appraisal is required for the property you're purchasing, your lender will place an order for it during the process. The appraisal is used to determine the home’s market value and the underwriter reviews the appraisal to ensure it meets the Uniform Standards of Professional Appraisal Practice (USPAP) standards.


    Assets include many different forms such as checking and savings accounts, stocks, bonds and retirement funds. The underwriter reviews your bank statements to ensure sufficient funds are available for closing and reserves. The reserves measure the number of months you could make your mortgage payment if there were a loss to your income.


    The underwriter reviews your credit history as well as your credit score (FICO). When examining your credit history, the underwriter reviews that payments have been made timely. Your credit score is driven by factors including payment history, credit usage and any derogatory events such as bankruptcies.

    What are the most common concerns for mortgage underwriters?

    There are potential red flags an underwriter must consider.

    Returned checks or Non-Sufficient Funds (NSFs) charges

    Accounts reflecting overdrafts or NSFs charges may be an indication of financial mismanagement and could be considered in the overall credit decision.

    Large deposits

    Irregular or large deposits into your accounts can be indicative of undisclosed debt. If those funds are needed for the loan closing to cover items such as the down payment, reserve requirements or closing costs than additional documentation verifying the source of funds may be required along with a letter of explanation.

    Credit issues

    A low FICO or a history of delinquent credit is another red flag to the underwriter. It can impact the overall credit decision and may also result in higher interest rates.

    Employment issues

    Gaps in your employment history or frequent job changes are potential red flags and may result in a request for a detailed work history or explanations.

    Bankruptcies or foreclosures

    Filing for bankruptcy or foreclosure can have long term impacts to your credit history and impact qualifying for a loan. Either of these events can result in a lower FICO and you could end up paying higher interest rates.

    Reasons a mortgage underwriter may decline a loan?

    A loan can be denied for many reasons which can include:

    • Your FICO is too low: Having a low credit score can be an issue for most steps in the homebuying process.
    • Your income is unstable: An important part of your application is your employment history and income stream.
    • You have a higher amount of debt: A high debt-to-income (DTI) ratio indicates your expenses are higher than your monthly income which can have a negative impact on the credit decision. The lower your DTI, the more likely you will be able to continue to make your mortgage payments.
    • Insufficient funds to close your loan: You're responsible to pay the difference between the purchase price and the loan amount. If sufficient funds aren't available to close, it could result in a decline.

    If the lender is unable to approve your loan, they are required to provide the reasons for the decline. Understanding why your loan has been declined can help you take the necessary steps to improve your financial position.

    Understanding how an underwriter reviews a loan can help as you prepare to apply for a mortgage. If you would like more information, please speak with a Home Lending Advisor to learn more.

    Have questions? Connect with a home lending expert today!

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