Role Of Mortgage Underwriters During Home Loan Process

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Role Of Mortgage Underwriters During Home Loan Process

This BLOG On Role Of Mortgage Underwriters During Home Loan Process Was UPDATED On October 20th, 2018

Mortgage underwriters are those who will be reviewing borrowers mortgage loan application:

  • Mortgage Underwriters decide whether mortgage loan application gets approved or not
  • The role of  mortgage underwriters job is to make sure that every line item borrowers stated on their mortgage information is correct
  • Their job is to verify the information from mortgage application and credit report with documents provided by borrowers
  • Role of mortgage underwriters is to make sure and verify that borrowers meet agency guidelines plus their own lender overlays
  • All income, W-2s, 1099s, and income tax returns will be verified with the Internal Revenue Service

Responsibilities And Role Mortgage Underwriters

Mortgage companies rely on mortgage underwriters to be their Guardian Angels:

  • Lenders rely on their underwriters in making sure that the mortgage loan does not go bad
  • The role of mortgage underwriters is to avoid to underwrite loans that eventually may go into default
  • Defaulted loans will most likely get investigated for incompetence and/or criminal liability
  • Mortgage underwriters take their job seriously
  • They have a lot of responsibility put on them
  • However, like in all fields, there are the few that take their jobs a little too seriously when it is not necessary and that includes mortgage underwriters
  • There are unreasonable mortgage underwriters in the industry who can make many lives miserable and can probably drive anyone insane

Conditions Requested By Mortgage Underwriters

The mortgage application process can be extremely stressful if you are not an organized person.

  • The role of mortgage underwriters is to ask you for many documents such as the following are verified:
    • tax returns
    • W-2s, bank statements
    • bankruptcy paperwork if applicable
    • foreclosure paperwork if applicable
    • deed in lieu paperwork if applicable
    • short sale HUD settlement statement if applicable
    • divorce decree if applicable
    • child support payments if applicable
    • sources of irregular deposits or larger deposits

It is expected from mortgage underwriters to request conditions. Borrowers should understand that mortgage underwriters have tons of financial responsibilities. Their job is to make sure that the mortgage loan they underwrite and approve meets all agency guidelines and does not default.

Typical Requests And Role Of Mortgage Underwriters

Mortgage underwriters will most likely request updated bank statements and updated paycheck stubs.

  • If you extend your closing, you will be required to provide update bank statements and paycheck stubs until the time you close
  • This is a reasonable request and mandatory for all mortgage underwriters and mortgage lenders

Letters Of Explanations

Letters of explanations will be part of mortgage process and may seem ridiculous many times.

  • However, since mortgage underwriters have the power to approve mortgage loan or deny it, if mortgage underwriters request letters of explanations, the best thing to do is to provide it
  • If their is late payment reporting from credit card payment, mortgage payment, auto payment, student loan payment, consumers will need to write a letter of explanation
  • Letters of Explanations for reasons on each late payment or derogatory credit item on credit report needs to be provided
  • For those with multiple of derogatory prior credit items, the chances are borrowers will need to explain every single derogatory credit item with a separate letter of explanation
  • Borrowers with multiple jobs in the past two years will need to write letters of explanations
  • Borrowers with prior foreclosure, deed in lieu of foreclosure, short sale, and/or bankruptcy will need to provide the actual documents as well as a detailed letter of explanation

Do not worry about letters of explanations to mortgage underwriters. Loan Officers should write the letter of explanation for borrowers. If loan officers asks borrowers to write letter of explanations to underwriters, fire that loan officer and get a new loan officer. Loan Officers should talk to borrowers and write the letter of explanations for them and NOT the borrower.

How Mortgage Underwriters View Bank Statements

Bank statements will be scrutinized and analyzed with a fine tooth comb.

  • Any irregular deposit of $200 dollars or higher needs to be sourced and a letter of explanation will be required
  • Any cash deposit in bank account, that cash will not count as verified funds
  • Cash is non-existent in the mortgage industry
  • Many folks have mattress money
  • This mattress money cannot be used towards mortgage down payment and is not qualified verified funds
  • If borrowers cannot source irregular deposits and have a lot of cash, they need to deposit cash in their bank account and wait 60 days

Lenders ask for 60 days bank statements and any irregular deposits older than 60 days will not count and does not need to be sourced. Mortgage Underwriters are the professionals that issue clear to close on a file.

Gustan Cho

www.gustancho.com

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