Underwriting is the process in which mortgage lenders verify your assets to get a home loan. This can take as little as two to three days, but typically it takes over a week to finish.
This process happens right before you close on a house, so timing can be crucial, particularly if you want to move in by a certain date. However, underwriting is unavoidable. All loans go through an underwriting process before the lender can promise you the funds for a purchase.
While you might have daily contact with your mortgage officer, the underwriting process is long, somewhat secretive, and seemingly mysterious and a bit stressful. Here’s why it takes so long, and a way to speed up the process.
What is underwriting?
Your mortgage officer typically reviews buyer’s tax forms, pay stubs, and other basic documents before issuing buyers a prequalification. Underwriting takes a fine-toothed comb through every form, deposit, and credit report, to ensure your credit-worthiness. An underwriter’s job is to make sure you meet the lender’s guidelines, confirming and assessing your income, debt, and credit.
Most of the mortgage process is relatively transparent, but underwriting takes place behind closed doors. Someone at the bank or a lender will relay any requests for documents or further explanations.
What does an underwriter look at?
The specific documents requested will vary based on the type of loan you are receiving. Expect to provide your tax returns, W-2s, bank statements, and paystubs.
You can also expect to send additional documentation every time an underwriter has a question. For instance, your bank statement might show a recent deposit of $2,000. You know it’s a birthday gift from your grandmother, but the underwriter doesn’t. You will probably have to write a letter of explanation detailing the gift.
Underwriting can be frustrating because the questions seem obvious. Don’t worry, many underwriters find it frustrating, too. The banks give almost no room for underwriters to make exceptions using their judgment. Underwriters are terrified of getting a loan audited and having a bad score, so they frequently will over-ask for documentation to cover their behinds.
How to speed up underwriting
The best way to speed up the process is to make sure your paperwork is complete, which should allow your loan to sail through in as little as two to three days. But if more documents are required – as is true for the vast majority of loans, even for those with perfect credit – expect to wait at least a week for the underwriter to issue a “conditional approval.”
Although the underwriting process can be frustrating, just know that you’re near the finish line. If the underwriter only wants a few additional documents, you should be “clear to close” soon enough!
