Unless you’re planning to purchase your new home with cash, you can expect to go through the mortgage underwriting process. This part of the home buying journey will typically take about a month, and for some first-time homebuyers, it may seem a little stressful. It’s really nothing to be anxious about, and in this post we’ll demystify the process and give you a better sense of what to expect (and how to prepare).
What is Mortgage Underwriting?
We’ll start with some basics, like what is mortgage underwriting?
Basically, this is the period in which your lender assesses how much money they’re willing to loan you. Naturally, your lender wants to maximize their odds of recouping their full investment, so they won’t approve you for an amount they don’t think you can repay. During the underwriting process, your lender will closely review your financial history to determine just how creditworthy you are.
The underwriting process will involve your lender closely hewing to federal guidelines and potentially also running your application through sophisticated software systems. If all goes well, you’ll be approved for a mortgage and ready to close within a month or so.
What Will Your Mortgage Underwriter Look For?
To assess your creditworthiness, your mortgage underwriter will ask for a lot of documentation. In particular, they’ll base their decision on the following:
● Your credit score (the lender will probably have a minimum requirement for you to meet)
● Your credit report (which shows your history of borrowing and repaying money)
● Property appraisal (your lender will want to ensure the home hasn’t been overvalued)
Additionally, your lender will want to confirm that you make enough income to keep up with monthly mortgage payments; you may be asked to supply them with pay stubs going back several months, and/or a letter from your employer stating that you make a steady salary.
Your mortgage lender will also want to keep tabs on your financial history during the underwriting process, ensuring there’s nothing unusual or disruptive that might make them less keen to lend you money.
Tips for the Mortgage Underwriting Process
To expedite the process and to ensure it’s as smooth as possible, consider these simple guidelines:
● Get pre-approved. Before you even begin looking for homes, you can contact a lender about being “pre-approved,” which jumpstarts the process and also helps give you some sense of how much home you can afford.
● Stay organized. You’ll be asked to furnish your lender with a lot of paperwork. Start gathering all relevant financial records, including W-2s and bank statements, as early as you can.
● Avoid big changes. Don’t rock the boat! While your loan application is being assessed, don’t open any new lines of credit, quit your job, or splurge on a huge purchase.
● Stay in touch. Don’t hesitate to contact your underwriter with any questions or concerns.
The bottom line: Mortgage underwriting is a critical step in the journey to homeownership. I’d love to tell you more about what buying a house involves and welcome you to contact Ryan Minges Real Estate at your next opportunity.