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A Guide to the Mortgage Underwriting Process

June 16, 2023
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Getting a mortgage is the first step to purchasing a new home for most people.

During the mortgage process, called underwriting, lenders assess your creditworthiness and determine whether you’ll be approved for a loan. 

Here is a closer look at the steps involved in the mortgage underwriting process and how long underwriting takes.

What is mortgage underwriting?

Underwriting is a critical process in homebuying when a borrower's creditworthiness is analyzed, and eligibility for a mortgage loan is determined. An underwriter analyzes a borrower's income, credit history, employment status, debt-to-income ratio, and other factors to determine whether the loan is a good risk for the lender. This lengthy process requires a significant amount of documentation and verification of information.

How To Prepare for Getting a Mortgage

To prepare for the mortgage underwriting process, there are several things you can do:

  • Review your credit report: Check your credit report for any mistakes or inconsistencies. Once a year, you can get a copy of your credit report for free from the three main credit agencies: Equifax, Experian, and TransUnion. To keep an eye on things, request your report from a different provider every four months.
  • Get pre-approved: The pre-approval process for a mortgage loan can help you understand how much you can afford to borrow and give you an idea of what to expect during the underwriting process.
  • Make a larger down payment: Underwriters evaluate your loan-to-value ratio, which is the amount you plan to borrow compared with the value of the property. You can reduce your LTV, which helps your application, by making a larger down payment upfront.
  • Organize your financial documents: Gather all the financial documents you need for the underwriting process. This includes bank statements, pay stubs, tax returns, and other documentation showing your income, assets, and liabilities.
  • Address any outstanding debts: If you have outstanding debts, consider paying them off before applying for a mortgage loan. This can improve your credit score and make you a more attractive borrower to lenders.
  • Be prepared to explain any gaps in employment or income: If you have had gaps in employment or income, be ready to explain them to the underwriter. Provide documentation to show that you are currently employed and have a stable income.
  • Be patient and responsive: The mortgage underwriting process can be lengthy, and the underwriter may request additional documentation or information. Be patient and responsive to any requests from the underwriter to help keep the process moving smoothly.

How Long Does Underwriting Take?

The time it takes to close a mortgage can vary depending on the complexity of the transaction and how quickly all parties can complete their tasks. On average, it takes 30 to 45 days (four to six weeks) from the time of application to closing.

The Consumer Finance Protection Bureau can help you watch mortgage rates during this process and find you good offers.

How the Mortgage Underwriting Process Works

There are typically five steps in the mortgage underwriting procedure.

Step 1: Pre-approval

Before you begin your home search, it is a good idea to get pre-approved for a mortgage loan. Pre-approval is not the same as underwriting, but it is an important first step. During pre-approval, the lender will look at your credit score, debt-to-income ratio, and other financial information to determine how much you can afford to borrow.

Pre-approval typically takes a few days to a week, depending on how quickly you can provide the necessary documentation. During this process, you will need to provide pay stubs, bank statements, and other financial documents to the lender.

Step 2: Initial Underwriting

Once you have found a home and made an offer or identified the home you’re purchasing from a new home builder, the lender will begin the underwriting process. The first step in underwriting is to review your application and supporting documentation to make sure everything is in order. The underwriter will verify your income, employment, and credit history.

Initial underwriting typically takes one to two weeks, depending on the complexity of your application and how quickly you can provide the necessary documentation. The underwriter may also request additional documentation during this stage.

Step 3: Conditional Approval

If your application meets the lender's initial underwriting guidelines, you will receive conditional approval. This means that you are approved for a mortgage loan, but there are conditions that must be met before the loan can be finalized. These conditions may include providing additional documentation or paying off certain debts.

Conditional approval typically takes one to two weeks. The length of time may vary depending on the complexity of the conditions that must be met.

Step 4: Final Approval

Once all conditions have been met, the underwriter will give final approval for the loan. This means that the lender is ready to close the loan and fund the purchase of your new home.

Final approval typically takes one to two weeks, depending on the complexity of the conditions that needed to be met and how quickly you were able to satisfy them.

Step 5: Closing

The final step in the mortgage underwriting process is the closing. This is where you sign all of the necessary paperwork to complete the purchase of your new home. The closing typically takes a few hours, and you will need to bring a cashier's check or wire transfer for the down payment and closing costs.

Know More About Getting a New Home Mortgage

Mortgage underwriting is a critical process in the home-buying process. It can be a lengthy process that requires a significant amount of documentation and verification of information. The procedure is a challenge, but the reward of a new home is worth it. To get pre-qualified or to learn more about the mortgage process, head to BRP Home Mortgage.

The Brookfield Residential blog has resources and tips that can make your experience easier. Find out whether a 15 or 30 year mortgage is better for you, top credit myths for new homebuyers, and more.

To find out more about what our communities have to offer, contact us when you're ready.