Before any mortgage lender approves financing for a prospective homebuyer, they conduct something called underwriting. This is a form of due diligence where the mortgage underwriter reviews all the financial information provided by the applicant and decides on the risk associated with the loan. 

In other terms, underwriters are the members of the mortgage team who decide how likely you are to make your monthly payments on the loan and to abide by the terms. The underwriting process begins with a completed application along with your W-2s, tax returns, recent pay stubs, verification of employment, a copy of a government-issued ID and permission to pull your credit. 

Some applicants are buttoned up and have a good credit score; they get approved quickly, especially with our 6-7-1 process* — which aims to turn around upfront underwriting in just 6 hours!

How mortgage underwriting works

The underwriter will examine the application for errors, inconsistencies and potential risk factors. They'll often contact your employer, confirm credit reports, research assets & liabilities, reconcile risks and ensure that the application meets the lender's approval guidelines. Larger mortgage companies may be willing to accept a higher level of risk than smaller lenders and may offer a broader range of loan products. 

Upon completing the process, the underwriter will approve or deny the application and send it back to a mortgage officer for borrower notification. At many leading companies, the underwriting process can take up to a week (which is why we're really proud of our six-hour turnaround). Some applicants might be approved with conditions, meaning they may have to supply additional information or answer clarifying questions the underwriter might have (more on that here.) Once you meet those conditions, they can move forward with the process. If denied outright, you may need to fix the issue or start the process over with a different mortgage product or lender.

What could go wrong in the mortgage underwriting process

Most mortgage applications move through the underwriting process with no bumps. But others have issues that gum up the works a little bit. More minor issues, like typos or employer contacts, are easy to fix, but major credit concerns can cause bigger delays. Anything that can go wrong will typically fall into one of three categories that we in the industry call “The Three Cs” – capacity, credit and collateral.

The top 7 issues that slow down mortgage underwriting

Cash In Hand. You're going to want to be sure you can provide proof of having the funds needed for your down payment, closing costs and some cash in reserve. Underwriters want to know how long you've had the money at your disposal and where it originated: i.e., Is it savings? Did you sell stocks? Is it a gift?

Credit History. A mortgage application can look like it'll meet all the lending requirements, but underwriters will dig in a little deeper with credit bureaus and creditors to validate a borrower's credit history. A record of late payments, too many lines of credit and high balances can raise a red flag. Underwriters won't approve applicants who don't meet the minimum credit requirements.

Ghosted Information. Underwriters dislike diving into the details only to find it's not 100% complete. Loan officers should check applications and information packets before sending them on for upfront underwriting, but nobody's perfect and essential information can go missing. Understandably, a forgotten document or income figure can put the brakes on, but it's also true that something as simple as a missing signature can keep you from getting your loan approved. For smooth sailing, it's best to triple-check your application before submitting it.

Property Appraisal. It's not just an issue with the app that can cause a slowdown. The property appraisal can also be the culprit. If the property gets appraised for a lower value than anticipated, the entire mortgage agreement could be in jeopardy. And if the seller won't budge on the price, the underwriter will most definitely deny the application.

Questionable Income. One of the biggest mistakes a borrower can make is exaggerating their income information. Underwriters are diligent people, and they've seen every trick in the book. They compare income from your tax returns, W-2s, bank statements and other documents. 

Spotty Employment. Mortgage underwriters want to see long-term, stable employment to assess a borrower's capacity to repay the loan. If an applicant can't show proof of a consistent income for two or more years, or if a borrower has recently become self-employed with no history of long-term success generating business, that person may be denied. A “Letter of Explanation” detailing the discrepancy can shed light on a borrower's situation and help the underwriter make a more informed go/no-go decision.

Tax Facts. Like income documentation, tax documents must back up all the other financial information you've supplied. Misstated information can set off alarms. Your loan officer will double-check this, but as a reminder, lenders are interested in your taxable income or AGI (adjusted gross income) to assess risk. Many borrowers make the mistake of listing gross income on their mortgage applications. 

Help your underwriter help you

Underwriters have the power to approve or deny an application. While many feel empathetic toward a prospective homebuyer's particular situation, they're all about the numbers. 

Our advice is to be aware of the potential mistakes listed above and take the necessary steps to avoid them. If you're not a math whiz, get help from someone who is. Consider where there are gaps in your apps and ask your loan officer for advice on which areas might need explaining. And by all means, do a thorough proof of the application before submission. A house is a big purchase, so don't rush it. 

Our goal is to have upfront underwriting completed in as few as six hours* from receiving your application. Granted, this timeline can be impacted by a few things: how quickly you turn in all the documentation, holidays and the time of day you submit your application. 

If you have a question about underwriting approvals or other parts of the mortgage process, reach out to one of our local loan officers to discuss your options. Or, if you're ready to get started now, you can always apply online!

*While it is Movement Mortgage's goal to provide underwriting results within six hours of receiving an application, process loans in seven days and close in one day, extenuating circumstances may cause delays outside of this window.