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Home Buying

What Is the Mortgage Underwriting Process?

11 Minute Read

So, you’ve been looking at homes for weeks and you finally found one you just loved. Kitchen with granite counters? Check. Open floor plan? Check. Big backyard for the dog? Check! It was all fun and games until you started the mortgage process.

Welcome to adulthood.

Now you have to choose the right lender, gather your documents, and start the mortgage underwriting process. Sounds boring, but understanding all this underwriting stuff is an important step in the process of getting your home sweet home. Ready? Time to rip off the Band-Aid.

What Is Mortgage Underwriting?

We get it. Mortgage underwriting sounds really complicated—and it kind of is. But let’s break it down.

Mortgage underwriting works like this: you submit an application and a specialist, called an underwriter, reviews. They look at your application and say, “Hey, I think Mike can pay back a mortgage.” Or “No, Mike is terrible with money.”

What’s the underwriter looking for? Basically, they want to see if loaning you money is risky or not.

How can underwriters tell if you might be risky business? They’re looking at the three C’s: credit, capacity and collateral. More on those in a bit.

As part of the approval process, underwriters use specific guidelines and even computer programs to check the levels of risk in your mortgage loan. So, there are two ways to do this: automated underwriting and manual underwriting.

Dave Ramsey recommends one mortgage company. This one!

There are two types of underwriting: automated underwriting and manual underwriting.

What’s the difference? Good question. Let’s break it down.

Automated Underwriting vs. Manual Underwriting

Automated underwriting is a computer-generated process. It can be used for several kinds of loans, not just mortgages. With just a small amount of info (like your Social Security number, address and annual income), the program can gather things like your credit history—if you have a credit score. And since the automated underwriting system is preset with certain rules and guidelines, it can process things quickly.

You’ll still have to provide certain documentation to an underwriter to finish up the loan and close on your home.

Manual underwriting is done by a person, not a computer program. The underwriter working on your loan reviews your loan application and uses supporting documentation to figure out whether or not you can afford a mortgage.

If you have special circumstances, like a decent net worth but no credit history (aka you have money but no debt), your lender might choose manual underwriting instead of an automated process.

Manual underwriting mean you have to bring more paperwork, and it typically takes longer than the automated process. But that makes sense, right? You aren’t dealing with a preset computer program but with a living, breathing human.

What Does an Underwriter Do?

Approve. Suspend. Deny.

That’s the quick answer. Here are the details: Your loan underwriter is ultimately the person who decides whether or not you can qualify for a mortgage.

Your underwriter knows if you’re a good candidate just from looking into how you’ve handled money in the past. They’re thinking about letting their company loan you a rather large sum of money, after all, and they want to be sure you can and will pay those monthly mortgage payments.

What Does an Underwriter Evaluate?

How does an underwriter know if you qualify for a mortgage? It’s time to get back to those three previously mentioned C’s: credit, capacity and collateral. This is exciting, right?

1. Credit—your credit history or payment records

Let’s be real. A credit score says nothing about your real financial situation. It doesn’t reflect your annual income, your net worth, or how much cash you have in the bank.

What it does show is how much debt you’ve had, how long you’ve had it, and whether or not you make consistent payments. It’s an “I love debt” score, and we think it’s a pretty dumb way to decide whether or not you can afford a mortgage.

But in automated underwriting, your credit score has a big impact on whether or not you can buy a house.

With Dave Ramsey’s 7 Baby Steps, he recommends paying off all of your debt and saving an emergency fund of 3–6 months of expenses before you buy a house. When you pay off your debt and close those accounts, your credit score will eventually disappear. That’s a great thing!

But . . . it also means you’ll have to use manual underwriting to get a mortgage loan. Don’t worry. It’s not like having a loose tooth tied to a door that’s then violently slammed shut. It just means a little more work and effort.

In the manual underwriting process, the underwriter won’t use your credit score to decide if you qualify for a loan. Instead, they look through payment records and documents that prove you can pay back your mortgage.

We’re talking about things like past rent payments, utility payments, gym memberships or even insurance payments. If you’ve been paying those on time and in full, you’re looking like a pretty responsible and trustworthy loan candidate.  

In other words, manual underwriters look at your whole financial picture instead of just your relationship to debt.

If you don’t have a credit score because you’re living debt-free (Go you!), talk to our friends at Churchill Mortgage. They offer manual underwriting and can help you get the right mortgage loan for your situation.

2. Capacity—your income and assets

When evaluating your ability to take on a mortgage loan, the underwriter is looking for proof you’re in a good spot financially. They’ll need this information from you as the borrower, no matter if you’re using an automated or manual underwriting process. Here’s what they’ll focus on:

Income and employment: Most of the time, underwriters look for around two years of steady income. They’ll probably ask to see previous your tax returns or other records of income. You might have to provide additional paperwork if you’re self-employed.

Assets: Assets is a fancy word, but the underwriter’s just making sure you have cash in the bank. You’ll need to close on your mortgage loan and cover all the closing costs and fees involved, after all. Plus, they want to make sure you’d keep up with the mortgage payments if you ever lost your job.

Liabilities: Do you have debt or any other financial responsibilities like alimony or child support? The underwriter wants to make sure you can afford the mortgage loan both now and in the future.

3. Collateral—your down payment and home value

To see the “collateral risk” of your mortgage, the underwriter needs to know the value of the home you’re buying. They don’t want to loan you a bunch of money for a house that’s a piece of junk. That’s why the lender will always order an appraisal as part of the closing process.

Your underwriter also needs a property survey that includes the property lines of the land and the placement of the home on that property. Then they’ll get a copy of the title insurance, which shows there are no liens, unpaid taxes or judgments on the property.

Last but not least, the underwriter considers your down payment. The bigger your down payment, the less risky the loan is to the lender. We recommend putting down at least 10% of the home’s value, but 20% is even better! A down payment of 20% keeps you from having to pay private mortgage insurance (PMI), which lowers your overall payment for the life of the loan. Boo yah.

How Long Does Underwriting Take?

Get cozy, friends, you may be here a while. The underwriting process can take anywhere from a few days to weeks. Your loan type, financial situation, missing paperwork, and issues with property surveys or title insurance are all things that can affect how long it takes an underwriter to approve, suspend or deny your mortgage.

A great tip for speeding up your underwriting process is to become a Certified Home Buyer with Churchill Mortgage. That means an underwriter reviews your file before you go under contract on a house. It’s even better than being preapproved or prequalified for a mortgage.

And that extra certification helps you not only stand out from other buyers, but also save time on the whole underwriting process once you find the home of your dreams.

Keep in mind that the underwriting process is just one of the steps in closing on a house. Other factors in the home-buying and mortgage loan process can dramatically affect how long closing on your house takes.

What Are the Steps of the Mortgage Underwriting Process?

The process of getting approved for a mortgage by an underwriter can seem like a lot. Here are the steps that have to take place so an underwriter can review your file and give you the ultimate green light: Clear to close!

The most important thing you can do is respond to your lender’s requests for information as promptly as possible. That will keep things moving smoothly, even if you hit some bumps along the way!

The most important thing you can do is respond to your lender’s requests for information as promptly as possible. That will keep things moving smoothly, even if you hit some bumps along the way!

Step 1: Apply for the mortgage.

Before you can get a mortgage, you need to fill out an application. You can do this in person with your lender or electronically. You may also need to give additional information at this point. Don’t worry—your lender will let you know exactly what they need!

Step 2: Receive the loan estimate from your lender.

After your loan application is received, your lender will give you a loan estimate to review. This document shows you about what you’ll pay for your monthly mortgage payment, interest rate, total cost and principal in the first five years—and the percent you pay in interest over the life of the loan. Remember, this is just an estimate. You’ll receive final numbers as part of your Closing Disclosure (see step 6).

Step 3: Get your loan processed.

Time to get your paperwork in order! During this stage, your lender or loan processor will request documentation for the personal and financial details from your mortgage application. Once the information is gathered, the underwriter starts checking all this data to look for any gaps or potential risks.

Step 4: Wait for your mortgage to be approved, suspended or denied.

The underwriter can either approve, suspend or deny your mortgage loan application. In most situations, the underwriter approves the mortgage loan application—but with conditions or contingencies. That means you’ve still got work to do or info to provide, like more documentation or an appraisal.

Step 5: Clear any loan contingencies.

This is when you’ll work with your lender to make sure you’ve cleared any of those contingencies they found in step 4. Also, your lender locks in your interest rate. Once the conditions have all been met, you’ll receive a “clear to close” from your lender. That means your mortgage loan is ready to be finalized on closing day.

Step 6: Close on your house.

As part of the closing process, you’ll receive a Closing Disclosure at least three days before your closing date. That gives you time to review your loan details, like your monthly mortgage payment and the amount you need to bring to closing.

Once you close and receive the keys to your new house, your mortgage loan process is officially complete! (Run with joy to the nearest home improvement store and get the material to build that white picket fence!)

Get Mortgage Help

The underwriting process probably won’t be that easy without a reliable underwriter. Churchill Mortgage specializes in manual underwriting to help you purchase a home without a credit score, and they’re only mortgage company we trust to help you make smart decisions about your home loan! They’ll help you know if you’re financially ready to buy a house—and how much you can truly afford. is.

If you’re only in the beginning of the home-buying process, it’s important to have experts on your side, in your court, or whatever teamwork reference you like best.  Make sure you have a qualified real estate agent there to help you make wise choices. Anything less is basically the worst.

Buy a House with an Agent Who Serves, Not Sells

Buy a House with an Agent Who Serves, Not Sells.

You need an agent who cares more about you than their commission check.
Find a Buyer's Agent

Buy a House with an Agent Who Serves, Not Sells.

You need an agent who cares more about you than their commission check.
Find a Buyer's Agent