How Do Underwriters Approve Mortgage Loans

In this blog, we will discuss and cover how do underwriters approve mortgage loans when analyzing and processing borrowers. Mortgage Underwriters play the most important role in the mortgage process. There are certain ways on how do underwriters approve mortgage loans.

Underwriters are professionals who approve or deny mortgage loans. There is no reason why a loan should get a denial if they were properly qualified by the loan officer.

Unfortunately, like in any other profession, there are underwriters who will drag their feet. They will issue conditions after conditions after the initial conditional loan approval which does not happen with Gustan Cho Associates. In this article, we will cover and discuss How Do Underwriters Approve Mortgage Loans For Borrowers.

How Do Underwriters Approve Mortgage Loans And Issue Approvals

One of the most frequently asked questions we get from our clients at Gustan Cho Associates is how do underwriters approve mortgage loans. Mortgage underwriters are the people who decide whether to approve or deny a mortgage loan application.

Mortgage underwriters are trained professionals who have a lot of responsibilities to their employers. One mistake on one loan file may cost the mortgage company a lot of money.

If mortgage underwriters do not follow the federal minimum lending guidelines as well as their investor mortgage lender overlays, that may mean that the mortgage loan is not salable. It may mean a mortgage loan needs to be kept in the house. The lender will be stuck with the loan until the borrower refinances or pays off the balance.

Lending Guidelines Underwriters Follow

Another frequently asked question from our borrowers is how do mortgage underwrites approve mortgage loans. Mortgage underwriters need to follow two types of lending guidelines as well as their own lender overlays. Federal lending guidelines need to be followed by all underwriters.

Overlays depend on the individual mortgage company. This is because each lender has its own overlay requirements.

Federal lending guidelines are specific mortgage lending guidelines on particular loan programs. For example, FHA loans need to adhere to HUD Guidelines. Conventional loans need to adhere to Fannie Mae and Freddie Mac guidelines. VA loans need to adhere to the Department of Veteran Affairs guidelines. USDA loans need to adhere to USDA Rural Development guidelines

What is Mortgage Underwriting?

Mortgage underwriting is the analysis carried out by the lender to determine the scope of risk associated with the loan application. Underwriters consider the applicant’s financials, the property, the loan request, and several other details to ascertain loan approval, repayment guarantee, and compliance with loan guidelines.

It is important to note that this is the step after the full mortgage application is submitted and, more often than not, comes after preapproval, which is the general estimate that does not guarantee approval, unlike the full application.

Underwriting Standards concern themselves with verifying and riskassessing the loan’s repayment by the borrowers. They usually tackle specific areas called the “3 C’s of Credit Risk,” with some sources including a fourth, which is Capital or Assets. To determine the loan’s ease of access to the secondary market, they adhere to guidelines issued by Fannie Mae or Freddie Mac for any of the standard loans.

What Happens During the Underwriting Process Of The Mortgage

Almost every lender will agree with the steps below and follow them uninterrupted:

Identity Confirmation and Document Evaluation

• Steps to follow: First, submit the loan application and all the documents the underwriters require.
• The loan underwriters will take your application after you submit the documents for your loan application.
• The underwriter then establishes your identity by confirming some documents.
• Pay stubs, tax returns, and even W-2s could be required to verify the broad type of income.
• The types of debts the underwriter could ask for include bank accounts and investments.
• The amount you owe will determine your asset type, and one under $500 could be acquired.
• The total income earned by you, then, when accounted for, will be under what you owe.
• This step clears something after all, since you can afford to repay something owed.
• Evaluation of Your Credit Standing: The underwriter will evaluate your credit standing after obtaining your credit score and report information.
• Some people pay on time, have a record, and don’t pay late.
• Checking and lowering down in the above, utter risk pay, utter record has to be past and pay like rancid.
• This (loans) score expects you and a banker might have to risk in your life with a loan.
• Property Appraisal: The appraiser assigns value to the home based on its size, physical condition, location, home amenities, and recently sold, comparable properties.
• The underwriter checks how this value compares to the loan amount and the purchase price.
• If the value is appraised below expectation, this could result in renegotiation, denial, or having to pay the difference ourselves, as it affects the loan-to-value (LTV) ratio (i.e., attempting to maintain a 97% or less LTV ratio for conventional loans with 3% down).
• This is to ensure that the collateral (which is the home) sufficiently secures the loan.
• Title Search and Insurance: A title company investigates the property for restraints like liens, unpaid taxes, foreclosures, easements, and direct title company dues.
• If any claims are found, the seller might be instructed to settle them first.
• Lender title insurance is necessary to protect the lender (and sometimes the buyer) from claims that may be brought in the future.
• Proof of home insurance is also provided.
• Final Decision: The underwriter considers the entire package from the vantage point of the lender’s guidelines.
• The loan is approved if the coverages are full and the risk is balanced (i.e., income is reasonable, credit score is favorable, and the property is sufficiently valuable).
• Their concern is the risk of default, the plausible amount of repayment, and the prospective loss on default.

How do Mortgage Underwriters Approve Mortgage Loans: Timeline

Normally, underwriting takes roughly 40 to 50 days from the date of application to a decision on your case. However, it can take a few days to a couple of weeks, depending on the lender, the intricacy of your finances, and the speed at which you provide the necessary documents. Automated underwriting processes are relatively faster in simpler cases compared to unique cases such as self-employed clients, which require significant manual processes.

Possible Outcomes

• Approval: If the loan has no major conditions (like a fine stipulation, such as signing a final pay stub, or signing off certain documents), it can be closed with the loan cleared for closing.
• Conditional Approval: Additional proof of income or insurance can be provided, which solves specific issues pending approval for resolution.
• Suspension/Pending: Providing unverified employment information to resume the process.
• Denial: If the DTI, credit, and appraisal status are all too weak, you must enhance your profile to reapply.

How Do Mortgage Underwriters Approve Mortgage Loans: Borrower Cooperation

Provide the needed information authentically and avoid signing off on documents that will add extra steps to the process after submission. Provide all necessary documents promptly.  Major financial steps such as opening new credit lines, job changes, or significant expenses should be avoided during underwriting, as they can enhance your DTI or credit.  Stay in charge of your credit and increase your debt limit. Suppose you are not approved or are approved with limitations. In that case, you should ask for additional information to correct problems before reapplying.

How Do Mortgage Underwriters Approve Mortgage: Overlays

Gustan Cho Associates Mortgage Group is one of a few mortgage companies in the nation that has a no-lender overlay business model.

We are associated with over 280 wholesale lending partners. Unlike other mortgage lenders, we have the ability to broker all of our loans thus yielding a wide variety of mortgage options at the best rates.

We just go off DU/LP FINDINGS. Overlays are guidelines that are in additional guidelines above and beyond the minimum set by FHA, VA, USDA, FANNIE MAE, and FREDDIE MAC.

How Do Mortgage Underwriters Approve Mortgage Loans: The Underwriting Process

In this section, we will discuss and cover how mortgage underwriters approve mortgage loans. We will also cover what lender overlays are by individual lenders.

Underwriters need to make sure that borrowers meet minimum lending requirements on the particular loan programs.

FHA Minimum credit score requirements are 580 FICO. Debt to income ratio requirements is 43% DTI if the borrower has credit scores under 620 FICO. If over 620 FICO, the back-end debt to income ratio can be capped at 56.9% DTI. Front end debt to income ratio is capped at 46.9% DTI.

Lender Overlays Imposed By Individual Lenders

Many lenders will have overlays on credit scores and debt to income ratios. Most lenders want a 620 Credit Score and debt-to-income ratios not to exceed 50% DTI. However,

Gustan Cho Associates has no overlays on credit scores and debt to income ratios. We just go off the automated findings.

Outstanding collections and charge-off accounts do not have to be paid on FHA and VA loans. However, most lenders will have overlays on collections and charge-offs. They will limit the number of collections or charge off account balances borrowers can have or have to pay off. Gustan Cho Associates does not have any overlays on collections and charged-off accounts no matter how much the outstanding balance is.

Conditional Mortgage Loan Approval

Once a mortgage underwriter has thoroughly reviewed the file and has determined the borrower meets all federal guidelines as well as the investor overlays, the underwriter will issue a conditional mortgage loan approval.

Conditional loan approval is when the underwriter decides that he or she will issue a clear to close once the borrower can meet all conditions that are listed on the conditional loan approval.

The mortgage processor gets assigned the file again. It is the job of a processor to quarterback the file with the loan originator and borrower.

How Do Underwriters Approve Mortgage Clear To Close

Once conditions have been met, the underwriter then issues a clear to close. This means that the mortgage company is ready to send out mortgage documents to the title company as well as fund the loan. Mortgage underwriters need to follow rules and regulations.

Many borrowers think that depending on the mood of the underwriter, they can approve or deny the loan applicant.

That is not the case. Underwriters need to be super careful not to make any mistakes when underwriting and make sure borrowers meet all of the lending guidelines on the particular loan program as well as their investor overlays.

How Do Underwriters Approve Mortgage Underwriting At Gustan Cho Associates

Gustan Cho Associates is a mortgage company licensed in multiple states with a unique business model. Over 75% of our borrowers are folks who could not qualify at other mortgage lenders. We have a one-stop-shop mortgage business platform because we have over 160 wholesale mortgage lenders. We are able to offer mortgage options other lenders cannot offer. Below are typical mortgage loan options we offer our clients:

• No lender overlays on VA, FHA, USDA loans
• VA and FHA loans with credit scores down to 500 FICO
• No Overlays On Fannie Mae and Freddie Mac Conventional Loans
• Closings in 21 days or less on complete files
• Over 75% of the borrowers at Gustan Cho Associates are folks who either got a last-minute mortgage loan denial or are stressing over the mortgage process.
• You can transfer your loan from a lender to us and close it in record time
• There is no stress during the mortgage process with Gustan Cho Associates

To qualify with a lender with no overlays or home buyers going through a stressful mortgage process with the current lender, contact us at Gustan Cho Associates at 800-900-8569 or text for faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays to take your mortgage inquiry and answer any questions you may have.

This BLOG On How Do Underwriters Approve Mortgage Was UPDATED on October 29, 2025.