The mortgage underwriting approval process often feels like an exceptionally long dental appointment. You’ve dutifully gathered the mountain of documentation required to obtain a mortgage. You’ll hand them over to your loan officer or a mortgage processor. Either way, your documents will be reviewed for thoroughness, completeness, and accuracy.
And almost everyone messes something up. They forget to check some box, omit a statement or miss a signature. Usually, your missing documents or signatures will be requested along with clarification on anything that’s not crystal clear about your documents.
Here’s what to expect out of the process.
Your Choice of a Lender
The underwriting process can vary a great deal depending on your loan officer and lender. The mortgage lender and loan officer you choose, the type of loan you need, and the general level of detail you’ve put into gathering your documents will play a large part in determining your personal level of underwriting discomfort.”
Your file will be passed on to a corporate mortgage processor in a centralized location that is typically nowhere near you, at least if you are with a large bank or lending institution.
Smaller lenders and independent mortgage brokers usually staff cohesive in-house teams. This results in more efficient operations and everyone is under one roof.
Even so, there are many good reasons to use a big bank. The giants can generally afford to take more chances than the small ones, and that’s great if you find yourself in a gray zone for approval. They also typically offer a wider variety of niche mortgage products for things like renovation and construction financing. But you’ll have to give up a little something in the way of efficiency in exchange for these advantages.
The Effect of “Turn Time”
All mortgage lenders have a “turn time,” the time from submission to underwriter review and the lender’s decision. The turn time can be affected by a number of factors big and small
Ask your loan officer what He/she expects your turn time will be and consider that factor in your ultimate choice of a lender. Keep in mind that purchase turn times should always be less than refinance turn times. Home buyers have hard deadlines they must meet so they get underwriting dibs.
Under normal circumstances, your purchase application should be underwritten within 72 hours of underwriting submission and within one week after you provide your fully completed documentation to your loan officer.
Approved, Denied, or Suspended
The underwriter will typically issue one of three dispositions to your application: approved, denied, or suspended.
If it’s approved, underwriting will typically assign conditions you’ll have to meet for full approval. This might be clarification regarding a late payment, a large deposit, or a past life transgression. It could simply be a missed signature here or there.
If it’s suspended—which is not completely unusual—the issue of underwriting becomes more confused and needs clarification. These delays are typically employment- or income-related, but occasionally an asset verification question can also lead to a suspension. In this case, you’ll get two conditions: one to clear the suspense and the standard conditions needed for full approval.
Finally, if you’re denied, you’ll want to find out exactly why. Not all loans that start as denials end up that way. Many times a denial just requires you to rethink your loan product or your down payment. You might have to clear up a mistake in your application or on your credit report.
Approved With Conditions
The status of the vast majority of loan applications is “approved with conditions,” aka “conditional approval.” In this case, the underwriter simply wants clarification and additional documents, mostly to protect himself and his employer. He wants the closed loan to be as sound and risk-free as possible.
Quite frequently, the additional items aren’t requested to convince the underwriter, but rather to make sure the mortgage meets all the standards required by potential secondary investors who might end up buying the closed loan when everything is said and done.
Your Role in All This
Your primary job during the time your loan is in underwriting is to move quickly on document requests, questions, and anything else that’s asked of you. No matter how ridiculous you think the document request might be.
Do not take the inquisition personally. This is just what underwriting does. Just handle the last few items and submit them so that you can hear the three best words in real estate—”clear to close”!