You’ve found your new home, signed a contract, and are about to go through the mortgage loan process. Your mortgage loan will likely take about 20-30 days to process, depending on the complexity of your loan, assets, debts, and employment status. You may be wondering, however, “do all mortgage applications go to underwriters?” And could underwriting slow down the process?
It depends. While OVM Financial will send any home loan under consideration to an underwriter before the loan closes, sometimes loans won’t make it that far. Below we’ll explain how mortgage application underwriting works.
What is mortgage underwriting?
Underwriting is basically the process OVM Financial goes through to assess whether or not you’re a good risk as a borrower. We want to make sure you have the ability to pay back your mortgage loan before we approve it.
The underwriting process begins once your loan officer has collected all your loan documentation and preapproved you. Then your loan goes through an automated underwriting system (AUS), which picks up any potential issues that might prevent loan approval.
What might prevent a loan advancing to human underwriting?
At OVM Financial, all mortgage applications go to underwriters before we close the loans, but sometimes the AUS will flag an issue that could delay or even halt the process. For example, you might have inconsistent income as an independent contractor or have recently changed jobs. At this point, your loan officer will likely return to you with requests for additional documentation, such as two years worth of tax returns or proof of income from a new employer.
What does an underwriter do?
At OVM Financial, manual (as well as automated) underwriting is a standard part of the mortgage loan process. Our underwriters ensure you’re qualified to assume a home loan. Among the things they will evaluate closely are the following:
- Your credit score and credit report
- The type of property you have under contract and whether or not you will occupy it as a primary residence
- The loan-to-value (LTV) ratio of the mortgage loan you’re seeking and how it compares to your home’s appraised value
- Your debt-to-income (DTI) ratio
- The source of funds for your down payment
- Your total assets and liabilities
- Your loan’s amortization schedule
Depending on whether or not the underwriter requests more documentation from you and how quickly you respond to such requests, the underwriting process can take anywhere from a few days to a few weeks.
What if the underwriter denies my loan application?
All mortgage applications go to underwriters; however, sometimes an underwriter denies the loan or approves it with conditions. Here are some examples:
- The underwriter determines your DTI is too high and denies your loan application with a directive for you to pay off some debt and then potentially reapply.
- The underwriter needs more documentation or information, such as confirmation of your employment status, and suspends loan approval until you can provide the requested details.
- The underwriter approves your loan if you agree to certain conditions, like producing proof of mortgage insurance or proof of a divorce decree.
If your mortgage application runs into snags during the underwriting process, talk to your loan officer about what you can do to keep the process moving forward, whether that means paying down some debt, getting errors corrected on your credit report, or making a larger down payment.