Underwriting and Home Loan Approval

Underwriting is the core process involved in being approved for a mortgage. The underwriter plays a big part in whether or not you will receive the loan. Once the appraisal report comes in, your loan officer will submit your file to underwriting.  To ensure a timely and smooth process, your loan officer will make the file as easy to understand for the underwriter.

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The underwriter is in charge of reviewing your file against the conditions of the loan program you have selected. They will confirm that all information included is accurate and seems plausible. In addition, they will verify income, debt, past rent, employment and other factors to decide if you are a good credit risk. Their decision will also weigh heavily on the appraisal report. This is due to the fact that the lender does not want to fund a loan that is more than the property is currently worth. 

If your loan officer has done their job to their full potential, everything should be relatively easy. By the time the underwriter receives the file, it has already been processed through an automated underwriting machine. This machine will give an idea of what conditions need to be met prior to closing. The underwriter will use the report from the automated machine as a guide, but it is still necessary for them to go through every detail themselves.

Receiving the Approval

After delving deep into every aspect of the file, the underwriter will then give the file one of four fates:

1. Denied
   • The underwriter does not feel that this person is a good credit risk and they are not qualified to receive funding from their institution.
   • This is very rare if the loan officer has done their job up until this point.
2. Approved; with no further conditions or questions
   • This is a rare outcome as well, because an underwriter’s job is to thoroughly question the file in front of them. But this outcome does happen.
3. Suspended
   • This means that the loan is not approved in the current package due to questions that remain to be answered.
   • It is assumed that if these questions can be cleared up and a few things change that the loan will be approved.
4. Approved conditionally
   • This is the most common outcome.
   •  This means that everything is good to go as long as you meet certain detailed conditions prior to closing.

The final loan approval will outline the terms and the amount of the loan. You are one step closer to owning your home!

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