What Do Underwriters Do?
After you’ve found a home you like, made your offer, and have been pre-approved for a mortgage, you might think the job is almost done. However, there is still one important hurdle to clear, and that is getting a final approval from an underwriter. So what exactly can you expect?
Think of an underwriter as a sort of detective. It’s their job to ensure that you and your finances are accurately represented and that there are no false figures on your loan application. Although this information is checked during a loan pre-qualification process, underwriters have much more stringent requirements.
Some of the criteria they look at includes:
An underwriter will first look at your credit score from the three major bureaus which are Experian, Equifax, and TransUnion. Red flags from things like bankruptcy or accounts going to collections will require a letter of explanation and steps of what you have done to correct the past credit issue. Credit report issues can sometimes be overcome with a solid employment history or larger down payment.
Part of the underwriter’s job is to make sure the appraisal of the home you wish to buy matches the size of the loan you’re seeking. This process is important as an appraiser’s valuation is the first line of defense in protecting a lender’s collateral. If an appraised value comes in artificially high, the lender is at risk if the borrower eventually defaults on making payments. A quality underwriter will know how to evaluate the appraiser’s work and take into account the home’s location, age, condition, and other significant factors.
Another part of the process is to determine how big of a risk it is to give you a loan. Your debt-to-income ratio, which is your monthly financed debts divided by your monthly gross income, is an extremely important aspect of underwriting. A high debt-to-income ratio, which can be due to a lack of sufficient income, a high level of debt, or both, can increase your perceived risk, hurting your chances of securing financing.
The best thing you can do to improve your overall underwriting experience is always to provide complete and accurate information on your loan application, and respond promptly to additional requests.
The professionals at Butler Mortgage have been helping Central Florida families like yours get the financing they need for more than 20 years. Not only can we assist you with your pre-approval process, but we can help you find the perfect mortgage for your needs and qualifications. For questions, or to speak with one of our representatives, call us today at 407-931-3800.