Buying a house can be exciting, but feeling a bit nervous about the mortgage process is normal. One big question most borrowers have is: “What do mortgage underwriters look for?” Understanding this can make getting approved much easier. Today, we will clearly explain everything mortgage underwriters check when reviewing your loan application.
What Do Mortgage Underwriters Look For?
Mortgage underwriters have one main job: make sure you can pay back the loan without problems. They review your income, debts, credit history, and documents carefully. Let’s break down exactly what this means:
Income: Your Ability to Repay
When people ask, “What do mortgage underwriters look for?” they are curious about how lenders decide if you can afford a home loan. One of the first things they check is if you have a steady income. They want to make sure you can pay your monthly mortgage without problems. Here are a few things underwriters usually look at:
- Paystubs (usually the last two months): They will ask for your last two months of paystubs. These show how much money you make at your job.
- W-2s or 1099 forms: These forms help underwriters see how much you earned from your job or if you worked for yourself.
- Tax returns (usually two years): Underwriters typically want to see your tax returns from the last two years. This helps them better understand your financial history.
If you earn bonuses, overtime, or have part-time income, the underwriter will check if this income has been steady for two years. Underwriters want proof it will likely continue. If your income varies widely or shows a drop, the underwriter may not count it as qualified income.
Debt-to-Income Ratio (DTI)
A critical number underwriters review is your debt-to-income ratio. This shows how much money you owe compared to how much you earn. Generally:
- Underwriters prefer your DTI to be below 43%.
- Lower is always better, but some loans allow higher DTIs depending on your credit score and overall financial situation.
Credit History: More Than Just a Score
What do mortgage underwriters look for? When you want a mortgage, underwriters check your credit report closely. They want to see how you’ve managed your money and bills, especially in the last year. Here are some important things they look for:
- Have you paid bills on time?
- Do you have recent late payments?
- Are there any collection accounts or charge-offs?
Mortgage underwriters look for bankruptcies, foreclosures, or short sales. If you’ve experienced these, the underwriter checks if you’ve met mandatory waiting periods. You’ll likely need documentation, like bankruptcy discharge papers or HUD-1 statements, to confirm dates.
Collection Accounts and Charge-Offs
If you have collection accounts, don’t panic. Mortgage underwriters look at these carefully, but you can still qualify:
- Medical Collections: These are usually overlooked by underwriters and won’t affect your DTI.
- Non-Medical Collections: If they total over $2,000, underwriters count 5% of the balance as a monthly payment in your DTI calculation—even if you don’t actually make payments.
If your collections are significant, you might need to provide a brief letter explaining your situation.
Credit Disputes
When thinking about getting a loan, it’s important to know what do mortgage underwriters look for. They pay close attention to any disputes on your credit report. A dispute means you don’t agree with something on your credit. This can hide bad marks from your score for a little while. Here’s what you should keep in mind:
- Disputes on medical collections are generally acceptable.
- Non-medical disputes with balances must be resolved before loan approval.
By understanding what do mortgage underwriters look for, you can be better prepared when it’s time to apply for a loan!
Assets and Reserves
Mortgage underwriters look at your bank statements closely. They verify you have enough money for your down payment, closing costs, and reserves—extra funds available after closing. Avoid large, unexplained deposits during the mortgage process, as these raise red flags.
Property Appraisal
Your home must appraise for at least the purchase price. Mortgage underwriters carefully examine the appraisal to confirm the home’s value and condition. If the appraisal is lower, you might need to renegotiate the price or adjust your down payment.
Automated Underwriting vs. Manual Underwriting
When people apply for a mortgage, they often use an Automated Underwriting System (AUS) system. This system helps decide if the application is good or not. What do mortgage underwriters look for in this process? They mainly check the results from AUS. If your application is approved, things move along quickly.
Sometimes, though, mortgage underwriters have to do a manual check. This happens if your finances are tricky or your credit score is low. In manual underwriting, the underwriter looks at more details. They might ask for letters to explain your credit problems or to show why your income is not regular. This extra work helps them understand your situation better.
Recent Changes in Underwriting for 2025
Mortgage underwriting guidelines continue to evolve. In 2025, mortgage underwriters will look closely at new FICO 10T credit scores. This new credit scoring model evaluates your debt trends over time, making managing your credit well in advance even more important.
Post-forbearance guidelines are also important now. If you’ve recently paused your mortgage payments, underwriters need to see you’ve resumed payments on time, usually for at least three consecutive months.
Practical Tips to Get Ready for Underwriting
Knowing “what do mortgage underwriters look for” is helpful. Here are easy ways to prepare:
- Pay Bills on Time: Late payments within the last year raise red flags.
- Keep Debt Low: Lower debt equals a better DTI and smoother approval.
- Document Everything Clearly: Provide clear explanations for credit issues.
- Avoid New Credit: Don’t open new credit accounts during the mortgage process.
Your Best Path to Approval: Gustan Cho Associates
At Gustan Cho Associates, we specialize in mortgages without lender overlays. Unlike traditional banks, we offer flexibility in underwriting. Here’s how we help:
- Flexible Debt Ratios: We can approve loans even if your DTI ratio is higher than traditional lenders allow.
- Understanding Credit Issues: We regularly help borrowers with bankruptcies, foreclosures, or collections.
- Fast and Clear Communication: Our experienced loan officers guide you every step of the way, ensuring no surprises during underwriting.
No Overlays, Just Real Solutions
When thinking about “what do mortgage underwriters look for,” it’s important to know that they check many things to decide if you can get a loan. At Gustan Cho Associates, we believe in finding solutions, not just pointing out problems. Here are some of the loans we can offer:
- FHA loans
- VA loans
- USDA loans
- Conventional loans
- Non-QM loans and Bank Statement loans for self-employed people
If a regular bank says no to you, we might still say yes! Our main goal is to help you become a homeowner quickly and easily.
Ready to Get Approved?
Stop worrying about “what do mortgage underwriters look for” and start feeling confident about your home purchase. Gustan Cho Associates is here to answer your questions, address your concerns, and make the mortgage process easy.
Call us today at 800-900-8569 or text us for a fast response. Prefer email? Reach us at gcho@gustancho.com. Let’s make your homeownership dream a reality!
Frequently Asked Questions About What Do Mortgage Underwriters Look For:
Q: What do Mortgage Underwriters Look for in My Income?
A: Mortgage underwriters check if your income is steady and enough to make monthly payments. They’ll ask for paystubs, W-2s, and tax returns.
Q: What do Mortgage Underwriters Look for in My Credit History?
A: They look at how well you pay your bills, especially your recent payment history, and if you’ve had late payments, bankruptcies, or collections.
Q: Can I Get a Mortgage with Collections on My Credit Report?
A: Yes, mortgage underwriters look for collections but often overlook medical collections. Non-medical collections over $2,000 might affect your approval.
Q: Why do Mortgage Underwriters Care About Debt-to-Income Ratio?
A: Your debt-to-income ratio shows if you have leftover money after paying debts. Underwriters prefer it below 43%, but some lenders allow higher.
Q: What Happens if I have a Credit Dispute on My Report?
A: Mortgage underwriters look for active credit disputes. Medical disputes are usually okay, but non-medical disputes must be resolved before approval.
Q: How Closely do Mortgage Underwriters Look at Bank Statements?
A: They look carefully at your bank statements to ensure that you have enough money saved and that there are no large, unexplained deposits.
Q: Do Mortgage Underwriters Look at Home Appraisals?
A: Yes, they closely review appraisals to make sure the home’s value matches your purchase price. If it doesn’t, you may need to renegotiate.
Q: What is Manual Underwriting, and When is it Used?
A: Manual underwriting occurs if your financial situation is complicated or your credit score is low. In these cases, underwriters do a deeper review.
Q: Have There Been Recent Changes in What Mortgage Underwriters Look for?
A: In 2025, underwriters started using the new FICO 10T scores, focusing more on your debt habits over time and checking your payment history after mortgage forbearance.
Q: How Can Gustan Cho Associates Help if I Worry About What Mortgage Underwriters Look for?
A: Gustan Cho Associates specializes in loans without extra strict rules, helping even if your debt ratio is high or you’ve had credit issues like bankruptcies or foreclosures.
This blog about “What Do Mortgage Underwriters Look For During Review” was updated on March 28th, 2025.
