The automated mortgage underwriting procedure hasn’t eliminated the need for thorough applicant checks and determining the borrower’s ability to pay. Underwriters use what is known as “the three C’s of underwriting” to evaluate a borrower’s trustworthiness: credit history, capacity, and collateral.
With so many moving parts and regulatory considerations, your in-house underwriters may be overworked, and your operational costs may rise. Hence, it’s advisable to get expert assistance which can make it easy for the borrower to get the mortgage underwriting done with ease. Read on to find out more regarding the context.
Role of a Mortgage Underwriter
A mortgage underwriter’s primary responsibility is assessing the risk level associated with granting your loan. To do this, they follow a procedure that gives them an idea of your financial situation and whether or not you’ll be able to make your loan payments on time.
Why Mortgage Underwriting?
Every borrower has their own set of strengths and weaknesses, every loan carries some degree of risk. There is no way to know for sure if a borrower will be able to make their loan payments on time, no matter how likely it is that they will. Instead, lenders implement procedures to ensure regulatory compliance to mitigate the risk assumed by the lending institution and the borrower.
Underwriters play a crucial role in this process. Depending on how your application for loan fares against predetermined risk criteria, they may decide to approve or reject your request. Mortgage underwriting support services have specialists in lending guidelines who examine your complete financial picture and the paperwork to back it up. Your application will be accepted assuming all details are satisfactory. The underwriter may decide not to approve your loan if they find that there is too much of a risk in lending to you, or if the property itself does not provide enough security.
Duration of Mortgage Underwriting
Whether or not the underwriter requires extra information from you, the lender’s workload and efficiency all play a role in the length of time it takes to complete the procedure of mortgage underwriting, which can vary from days to weeks. The more quickly you collect your paperwork and react to the lender’s demands for information, the more quickly and easily the procedure can go.
However, in the grand scheme of things, underwriting is simply one step in the financing process. This makes it easier to assist lenders and borrowers. A typical loan closing takes between 40 and 50 days.
Tips for Quick and Efficient Mortgage Underwriting
Following are some of the top tips to simplify and make mortgage underwriting more efficient:
Have your paperwork organized
Before applying for a loan, the easiest approach to track the process of underwriting is to be ready with all the paperwork. If you must obtain documentation from a certain institution, for example, do so immediately. Custom underwriting support for credit lenders empowers you with the following:
- Job information from the past two years (company papers and ITRs if you are self-employed).
- Salary slip of the past 2 months before your application.
- Full details of bank accounts such as accounts of savings, deposit certificates, and retirement
- Additional income data, such as separation amount or financial aid for children, bonuses, or commissions, etc.
- Additionally, if you intend to make use of the amount received in the form of gifts, as an initial payment, it has to be under your possession (i.e., in an account under your name) well before you apply.
- To authenticate that the money is received as a gift, a document mentioning the same is required. It can help you avoid any drawbacks.
Be forthright and truthful with your finances
Your underwriter will discover any dishonesty regarding your income, credit history, or assets, so there is no point in concealing anything. Include comments and explanations for anything that stands out on your credit report or statements.
Confirm what systems your lenders will use to assess your application
To find out if your lender employs automated internet systems to check your employment and assets, you can ask them. As a result of the pandemic, underwriting standards have become more stringent, and this may continue. Don’t put off applying for a loan because of doubts about when or if the economy will improve.
Keep in contact with your loan officer
It’s also a good idea to keep an open channel of contact with your loan officer regarding your work situation. Creditors now look at whether or not your kind of work provides a “basic necessity.” If it isn’t, they may check in with you more frequently during the underwriting process to make sure you haven’t been defaulting somewhere.
When you apply for a mortgage, an underwriter will assess your financial situation and the security you’re offering to determine whether or not to approve your loan. Loan eligibility is determined after a thorough investigation of the borrower’s financial history, including verification of identity, income, job, tax returns, bank statements, credit scores, and credit reports.