If you are applying for a mortgage, you will come across the term ‘mortgage underwriting.’
But what does it mean? And what is the role of the mortgage underwriter?
Mortgage underwriting is the process completed by a mortgage lender’s mortgage underwriter. The process of mortgage underwriting is to work out if the overall risk of offering a mortgage loan to the borrower satisfies the mortgage lenders’ lending criteria. This is to determine the borrowers’ overall affordability of the requested mortgage loan.
In this guide, we will tell you all you need to know about the mortgage underwriting process so you are fully aware of the implications for you after you make your mortgage application.
If you need any further information about the mortgage application process after reading our guide, get in touch with our friendly team of experienced mortgage brokers today.
What is mortgage underwriting?
Mortgage underwriting is the process wherein the lender will check their level of financial risk when lending you money. They will carry out various checks to determine your ability to pay back the loan and they will carry out a property valuation to make sure the home you intend to buy is suitable security to lend against.
If the lender thinks the level of risk is acceptable, your mortgage application should be approved. But if during their risk assessment they suspect you might not be able to make your mortgage payments, perhaps because they are worried about your employment status and level of income, your mortgage application may be declined.
What is a mortgage underwriter?
A mortgage underwriter works for the mortgage lender. It is their job to assess what level of risk the lender will be taking if they lend money to you.
The mortgage underwriter will assess your…
- Income and expenditure
- Credit history
- Eligibility (in terms of the lender criteria)
After determining the suitability of your property, the current state of your finances, and your financial history, the mortgage underwriter will come to a decision about your application.
It’s our observation that if the lender is satisfied that you don’t pose a high amount of financial risk, you will be granted mortgage approval. At this point, you will be able to go forwards with the various aspects of your house move, although the lender reserves the right to decline your application should there be any changes to your financial situation.
What part of the mortgage lender application process does underwriting occur?
Mortgage underwriting takes place near the end of the mortgage application process. If there are any issues during the underwriting stage, your application may be declined.
During the underwriting process, the following will occur.
A pre-soft credit check
A soft credit check is a process wherein the underwriter will make sure you are eligible for the lender’s mortgage product. Unlike a hard credit check, a soft search won’t affect your credit score.
During this process, the underwriter will gather various information about you relating to your legal status, affordability, and credit history. This will lead to the next part of the underwriting process.
After the soft credit check, you will be provided with a score based on the information the underwriter has gathered. To progress with your mortgage application, you will need to meet the minimum score set by the lender. If you are successful at this part of the underwriting stage, you will usually be offered a Mortgage Agreement in Principle.
A property valuation
Your mortgage provider will hire a surveyor to independently value the property to ensure it is suitable for the debt secured on it. This will usually be at your expense.
The mortgage underwriter will then review the surveyor’s report to make sure the property’s type and condition are in line with the mortgage provider’s lending criteria.
What information is checked during the underwriting process?
The underwriter will check the following at the underwriting stage of your application.
- Your credit report
- Your bank statements
- The property details
- Proof of income
- Proof of deposit – How to Provide Proof of Deposit for Mortgage Lenders
- The mortgage application form
The underwriter will check all of these to assess the level of risk you pose to the lender. There are a number of reasons why the above information will be taken into account.
Your credit history is checked to see how many applications for loans and credit cards you have made in the past. It is an indicator of how responsible you are when borrowing money and whether you have regularly made your monthly repayments. Learn what credit score is needed to buy a house.
Your bank statements are an indicator of your current financial status. The mortgage underwriter can get a better idea of your income and outgoings from your bank account statements and they can cross-reference them with the information you have provided on your application form to make sure it is all correct.
If the underwriter is suspicious about any aspect of your income or if they are worried about any outstanding debts you hold, the lender may require further information from you.
When it comes to the property, the underwriter will want to make sure it fits with the lender’s criteria. If they consider it high-risk, perhaps because there are structural problems or because it’s not worth what you might be paying for it, your mortgage application may be declined.
How long does mortgage underwriting take?
The mortgage underwriting process isn’t very long. In most cases, the mortgage underwriter will be able to make a decision within a week. However, there are a number of factors that can determine the length of time it takes. These include:
- The mortgage underwriter’s level of experience
- The current workload of the underwriter
- The complexities of your application
The lender will often let you know if there will be a delay in the mortgage underwriting process but in most cases, they will give you a timeframe of a couple of weeks as it shouldn’t take any longer than this.
Is it possible to speed up the mortgage underwriting process?
If there are no mistakes or red flags on your mortgage application form, the process shouldn’t take very long at all. As such, the best thing you can do when you complete your form is to make sure all of the information is correct. By doing so, there is the chance that the underwriting process will be speeded up.
You should also check your email inbox regularly as the underwriter might require extra information from you. The sooner you reply to their requests the quicker the underwriting process will take.
It’s worth noting that our mortgage advisors can help you with the mortgage application. In our many years of experience, we always make sure that all the information is correct before you send it away for mortgage approval and as such, there should be fewer reasons for delays within the underwriting process.
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What happens if the underwriter declines my mortgage application?
If your loan application is declined, you shouldn’t panic. There will usually be a good reason behind this mortgage decision and we will request this from the mortgage provider. Once we have identified the issue, we will give you the mortgage advice you need to ensure your next application is not declined.
Why do mortgage underwriters decline mortgage applications?
When we ask the lender “why was the mortgage application declined?” they may come back to us with one or more of the following reasons for the mortgage underwriting decision.
- You have too much debt
- Your credit score is unacceptable
- Your monthly expenditure is too high
- Your down payment for a deposit was insufficient
- There are concerns about your employment situation
- There are concerns about the property’s type, condition, or value
- There are discrepancies on the application form
There could be another reason but whatever the case, our advisors are qualified to provide mortgage advice that can help you with your personal situation.
We may advise you to improve your credit score, for example, or we may take a look at your personal financial situation and give you tailored advice about your expenditure in relation to your approximate annual income.
How can I improve my chances of mortgage approval?
In our experience, before you apply for a mortgage there are a number of things you can do to increase the chances of your mortgage being approved.
Speak to a mortgage broker
As we suggested already, a mortgage advisor at YesCanDo Money can help you with your loan application form. We will firstly carry out an income multiple calculation. We will make sure your form is filled out correctly so there will be less need for the lender or underwriter to reject it because of missing or inaccurate information. We will also advise you on the financial documents you need to back up your application.
It’s with our expertise that we can help increase your chances of getting a mortgage approved by matching you with the most suitable lender. As lenders often have different criteria regarding income multiple calculations, age, level of income, deposit sizes, credit reports, etc., it might be that some lenders are better fitting to your personal circumstances than others. Your appointed mortgage advisor will have an understanding of which lender will be right for your situation and they will advise you accordingly.
For further advice, you can get in touch with a establish online mortgage advisor about your mortgage online using the contact form on our website.
Check your credit report
UK mortgage underwriters will always check the credit and financial background of mortgage applicants. With few mortgage providers lending to those with a poor credit score, you should do what you can to improve your credit rating and credit history before the underwriter carries out their checks.
You can improve your credit score by…
- Making sure you’re on the electoral register – lenders use this to validate you are who you say you are
- Proving your creditworthiness – it’s worth taking out a small line of credit if you haven’t yet done so, as this will prove your ability to make your mortgage repayments
- Paying your bills on time – if you default on your payments, your credit rating will be negatively affected
- Checking for errors on your report – be on the lookout for outdated information about your debts or information that doesn’t apply to you (get in touch with the relevant credit reporting agency if there are any mistakes on your report)
When you get in touch with an exclusive mortgage expert at YesCanDo Money, we will advise you on these and any other steps you might need to take to improve your credit rating.
Lower your debt-to-income ratio
This is the comparison between what you earn each month and what you owe to others. You can find out what your debt to income ratio is by adding up your loan payments (including child support and alimony payments as well as credit cards and other debts) and multiplying the figure by your gross income. Don’t include your utility bill payments as these don’t count.
The lower your debt-to-income ratio is the better as this will affect your chances of mortgage approval and it can determine the maximum loan amounts the lender will be willing to offer you.
To lower your debt-to-income ratio, you should take steps to reduce your debts, improve your income, and resist taking out extra lines of credit.
Make a large deposit
A large down payment for your deposit can reduce your loan to value ratio and increase your chances of getting a better mortgage deal. It also proves to the underwriter and lender that you’re able to make savings and as such, gives them better peace of mind when considering your ability to make your loan payments.
GET IN TOUCH WITH A MORTGAGE BROKER AT YESCANDO MONEY TODAY
To improve your mortgage chances, book an appointment with an online mortgage advisor at YesCanDo Money.
Your mortgage introducer will arrange an initial meeting with you, get to know more about your personal situation, and will give you all the advice you need on the subject of mortgage approvals.
Your online mortgage advisor will also be an expert on a range of other different mortgage subjects, so you will be given further advice related to your mortgage at no cost to yourself, as YesCanDo Money is a FEE-FREE mortgage broker.
As our specialist finance and mortgage team have your very best interests at heart, you can be assured that the members of our team will do their very best to locate those mortgage lenders that are right for your situation. We look forward to hearing from you.