Ever wonder what goes on behind the scenes after you submit your mortgage application? One of the key steps is underwriting. We asked PrimeLending Vice President of Underwriting, Brian Patrey, to answer some of the questions many borrowers have.
Q. What is the role of a mortgage underwriter?
A. A mortgage underwriter plays a vital role in helping people obtain a mortgage loan that suits their financial situation. The underwriter’s primary responsibility is to carefully assess the risk associated with each loan application to determine if the borrower meets the necessary criteria for approval. During the evaluation process, the underwriter carefully reviews and validates the borrower’s documentation, such as income and employment verification, credit history, and asset information.
At PrimeLending, our underwriters truly care about the financial well-being of our borrowers. We understand that finding the right mortgage is not just about getting approved, but about ensuring a smooth and successful homeownership journey. We go above and beyond to consider each borrower’s financial capacity, aiming to verify that the loan fits their unique circumstances while ensuring it remains manageable and sustainable.
When you work with us, you can trust that our underwriters will listen, evaluate, and do everything in their power to deliver a 5-star experience by providing timely decisions, clear communication, and valuable guidance to loan officers. Your financial health and peace of mind are at the heart of our commitment to providing exceptional service at PrimeLending.
Q. When does underwriting happen in the mortgage process?
A. The timing of the underwriting process for a mortgage depends on the market conditions. In today’s seller market in which there is a low inventory of available homes, many borrowers are submitting “To Be Determined” applications to get approved before they find their new home. This can give them a significant advantage over other potential buyers in a competitive market and make their offer more attractive. This also helps borrowers feel confident setting budget and home search criteria.
Q. What’s the difference between qualified and approved?
A. When it comes to a mortgage application, qualification and approval are two distinct stages. Qualification involves a review of income, credit, and debt information based on data the borrower provides, whereas approval involves a more thorough verification of the borrower’s financial information. The approval process takes longer than the qualification process since an underwriter validates the financial records in greater detail. In general, an approval gives the borrower, and seller, more confidence and peace of mind.
Q. How do underwriters evaluate a borrower’s creditworthiness and ability to repay the loan?
A. We consider the past and present when giving our best future projection. More specifically, we evaluate a borrower’s creditworthiness and ability to repay a loan by examining a variety of factors, including:
- Credit history: Assess the borrower’s history of paying debts on time, the types of credit they have used, and the amount of outstanding debt they currently have.
- Debt-to-income ratio: This is the ratio of reoccurring monthly debt payments compared to the monthly gross income.
- Employment history: Evaluates the borrower’s ability to maintain stable and reliable income.
- Financial standing: Reviews financial reserves, such as savings accounts, retirement accounts, and other assets.
- Property appraisal: Reviews property characteristics and market area to ensure property meets marketability and industry standards with a value that supports the transaction.
By evaluating these and other factors, such as requirements provided in loan program guidelines, we can determine a borrower’s creditworthiness and ability to repay the loan.
Q. What are some common mistakes people make when going through the credit underwriting process?
A. Here are some common mistakes made by borrowers that can make the process more stressful, or even jeopardize the chances of getting approved:
- Credit report errors: Borrowers should regularly review their credit reports to ensure that all the information is accurate and up to date. If there are errors, take the necessary steps to resolve them.
- Taking on new debt: Taking on new debt, such as opening a new credit card or financing a large purchase, like a new car, can increase a borrower’s debt-to-income ratio and place approval in jeopardy. If any of these events occurs, let your loan officer know right away.
- Changing jobs: Changing jobs during the underwriting process could jeopardize your loan approval. If you do change jobs, promptly let you loan officer know.
- Making large bank deposits: Deposits that cannot be explained or verified can raise questions for the lender.
- Stop making mortgage payments: Maintain consistent, on-time payments on all debts, including current mortgages, credit cards and student loans.
To avoid these and other missteps, borrowers should work closely with a loan officer and follow their guidance throughout the underwriting process. Being honest and transparent about their finances will help the process stay on schedule.
Q. How do you handle situations where a borrower’s financial situation is more complex or non-traditional?
A. PrimeLending underwriters understand that every situation is unique and may require additional steps to evaluate the borrower’s creditworthiness and ability to repay the loan. Here are some common ways we handle these situations:
- Self-employment income: If a borrower is self-employed, we may review their tax returns for the past two years to verify their income. The underwriter may also ask for additional documentation, such as profit and loss statements or business bank account statements.
- Commission or bonus income: If a borrower’s income includes commission or bonus payments, we may review their pay stubs and tax returns to ensure the borrower has a history of receiving this income and it’s likely to continue.
- Non-traditional credit: If a borrower has a limited credit history or no credit history, in some circumstances, we may consider non-traditional credit sources, such as rental payment history or utility bills, to evaluate creditworthiness.
- Multiple sources of income: If a borrower has multiple sources of income, such as rental income or investment income, we may review their tax returns and other documentation to verify the amount and stability of this income.
- Debt from non-traditional sources: If a borrower has debt from non-traditional sources, such as student loans or medical bills, we may ask for additional documentation to ensure that the borrower is able to manage this debt along with their mortgage payment.
In these and other situations, we will work with the borrower and their loan officer to gather the necessary documentation and assess the borrower’s ability to repay the loan.
Q. What advice would you give to someone going through the mortgage process?
A. To make the process go as smoothly as possible, it’s important the borrower clearly communicates their situation, responds to questions quickly and listen to the guidance of their loan officer. Here are some tips to keep in mind:
- Partner with your loan officer: Your loan officer can offer valuable guidance on how to manage your finances during the underwriting process, such as avoiding new debt or transferring funds.
- Ask questions and understand the process: Make sure you understand each step of the mortgage process and ask questions if anything is unclear.
- Don’t spend your down payment money: It’s important to keep your down payment funds separate and avoid spending them on other expenses.
- Send in documents promptly: Respond promptly to any requests for additional documentation from your lender to keep the process on schedule.
- Communicate any personal or financial event changes as soon as possible.
Q. What do you consider to be the most important qualities for a PrimeLending mortgage underwriter? How is PrimeLending’s underwriting process better?
A. When it comes to mortgage underwriters at PrimeLending, we set the bar high in terms of industry experience and expertise. Our underwriters have an average of 15 years of experience in this role, with extensive knowledge of a variety of loan products.
We take pride in delivering outstanding service and maintaining clear communication with loan officers and customers to ensure a smooth and stress-free loan process. If more documentation is needed, borrowers understand what we need and why. And we take great care to ensure our loans are originated in compliance with all regulations as well as product requirements from our investors and agencies.
We understand that this process can be overwhelming. Our goal is to ensure that our customers feel informed, supported, and confident throughout the underwriting process.
