Steps In The Underwriting Process By Mortgage Lenders

Steps In The Underwriting Process By Mortgage Lenders

Gustan Cho Associates are mortgage brokers licensed in 48 states

This Article Is About The Steps In The Underwriting Process

Steps In The Underwriting Process By Mortgage Lenders:

Most mortgage lenders have similar steps in the underwriting process.

  • However, each lender may have its own steps on how they process a loan from the time the homebuyers turns in the executed purchase contract to closing
  • Most home closings take 30 days if proper steps are taken
  • The minute the borrower turns in the executed real estate purchase contract, a mortgage processor is assigned to the file
  • The mortgage processor will close closely with the loan officer and the borrower
  • Everyone’s cooperation is required to make the loan get processed smoothly
  • The mortgage processor’s job is to make sure the file will get a clear to close in a timely manner so the borrower can close on time
  • The assigned mortgage processor is the quarterback of the file from the start of the mortgage process until the loan has closed
  • The key is to make sure all the documents and paperwork required for the mortgage underwriter to review is complete, has no missing pages, and is properly labeled by the mortgage processor
  • An experienced veteran mortgage processor will not submit a file that is not complete and/or has missing pages
  • A mortgage underwriter will be assigned to the file
  • The mortgage underwriter will be the key person in the mortgage process
  • The underwriter is the person who will review, underwrite, and issue the conditional loan approval

The mortgage underwriter is the person that issues the clear to close.

Understanding The Mortgage Approval Process

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Understanding the mortgage process can seem overwhelming to those who are not familiar with the process.

  • Often times mortgage loan borrowers enter into the mortgage application process without ever knowing what steps or stages there are in the process of purchasing a home
  • In this article, we will explore the mortgage underwriting step of the mortgage process
  • The mortgage underwriting process is where the decision is made of whether or not a borrower gets a loan approval or a mortgage loan denial
  • The pre-approval stage is the most important stage of the overall mortgage process
  • There should be no reason why a borrower who has been properly qualified and pre-approved should not get a mortgage loan approval

Mortgage Loan Denials & Stress During Mortgage Process

Over 75% of my borrowers contact us at Gustan Cho Associates is because of two reasons:

  • They have gotten a last-minute mortgage loan denial
  • They are going through major stress during the mortgage process

There is no reason why the two reasons above should happen.

  • The cause of a last-minute mortgage loan denial or a borrower going through major stress during the mortgage process is one reason and one reason only
  • The borrower was not properly qualified

Again, the pre-approval stage in the mortgage process is the most important stage in the mortgage process.

Pre-Approval Stage Of The Mortgage Process

The pre-approval stage is the most important phase in the entire mortgage loan process. If the borrower was properly qualified, the steps in the underwriting process should be smooth with no hassles and no stress.

  • The number one reason for last-minute mortgage loan denials is due to the mortgage loan originator not properly qualifying borrowers and not issuing a solid pre-approval
  • The mortgage loan originator needs to not just look at the credit scores but overall borrower’s profile
  • Whether they meet the minimum credit score requirements is important
  • But loan officers also need to carefully review the borrower’s credit report and ask the borrower many qualifying questions

Income is the most important factor in determining whether or not a borrower qualifies for a home loan.

Key Point Steps In Underwriting Process

Here are the main key points in going through steps in the underwriting process:

  • Borrowers can have the highest and best credit on this planet
  • But without qualified income, there will not qualify for government and/or conventional loans
  • FHA, VA, USDA, and/or Conventional Loans require qualified income and have a debt to income ratio requirements
  • However, borrowers with less than perfect credit and even outstanding collection accounts can qualify for mortgage loans with qualified income
  • Borrowers charge off accounts and credit scores as low as 580 FICO credit scores can qualify for 3.5% down payment FHA Loans with qualified income
  • With documented income and meeting minimum credit score requirements, homebuyers can qualify for a mortgage loan
  • Debt to income ratios is another major hurdle many mortgage borrowers face
  • A mortgage loan officer should carefully review the borrower’s tax returns and W2s when determining qualified income and not just take the borrower’s word for it
  • The loan officer should carefully make sure to use the adjusted gross income

Take the tax deductions the borrower has declared on their tax returns when qualifying income of the borrower.

Importance Of Processing  During Steps In The Underwriting Process

Once a borrower has been pre-approved, they can start shopping for a home. Once they have a real estate purchase contract, the mortgage process starts.

  • Steps In The Underwriting Process is the stage of the mortgage process in which borrowers often understand the least
  • Let’s start by explaining what happens during this stage
  • Once a borrower submits a real estate purchase contract, the file is assigned to a loan processor
  • The mortgage processor makes sure that all paperwork is complete and gets the file ready for underwriting
  • Once the file is complete with no missing pages, the file is submitted to the Underwriter

The mortgage underwriter is the key person who issues the conditional loan approval. The conditions are gathered by the mortgage processor and submitted to the same underwriter who issued the conditional loan approval. Once the mortgage underwriter reviews the conditions and determines the borrower meets all guidelines, the underwriter will issue a clear to close.

The Role Of The Mortgage Underwriter

The underwriter is the mortgage professional that reviews the file and issues a credit decision:

  • Underwriters thoroughly review all docs provided during the application process, the AUS results, credit report, tax returns, bank statements, appraisal assets, debts, public records search, and purchase agreement
  • The role of the Underwriter is to verify all of the information submitted and ensure that it meets all lender and program guidelines
  • Once all information has been reviewed by the Underwriter, providing it meets lender guidelines and program guidelines, he/she will issue an approval, likely a Conditional Approval

Conditional Approval means that the mortgage loan will receive final approval and clear to close if borrowers can satisfy the conditions on the conditional loan approval.

Clear To Close Stage Of The Mortgage Process

Clear To Close Stage Of The Mortgage Process

Once conditional loan approval is issued, the underwriter is ready to issue a clear to close once all conditions are met. The mortgage processor is normally assigned to clear the conditions. The processor works closely with a loan officer in collecting all the conditions from the borrower. So what conditions are typical for an Underwriter to place on a loan file?

Here are typical underwriting conditions:

  • IRS Tax Transcripts, Social Security Number Verification, Employment Verification, Appraisal, etc.
  • For those borrowers that may have abnormal items on their credit report such as a bankruptcy, there will likely be conditions of providing the bankruptcy filing paperwork and discharge paperwork
  • Letter of explanations for derogatory credit and credit inquiries
  • Borrowers with student loans that have been previously deferred, the UW may request account status letters to show the account is in good standing
  • Cash to close will need to verify and required to show where down payment funds will be coming from
  • For example, if borrower large deposit that is not the regular income, the borrower will need to provide the source of that deposit
  • Borrowers receiving gift funds and using it for the down payment will be required to provide additional documentation to support the gift such as signed gift letter and source of donor’s funds (30 days bank statement of the donor of gift)

Once all of the Underwriter’s conditions have been satisfied, the processor will submit the file to the underwriter for a Clear to Close.

About The Author Of Steps In The Underwriting Process

Gustan Cho NMLS 873293 is the author of this BLOG on Steps In The Underwriting Process and is the Editor In Chief of Gustan Cho Associates Mortgage And Real Estate Informational Center .

  • Gustan Cho of Gustan Cho Associates has been a real estate investor for over 20 years
  • Has owned and managed 7 apartment complexes consisting of 3,000 residential units
  • Gustan Cho like many of us Americans, fell victim to the economic collapse of 2008 and his credit suffered
  • Gustan did find getting a mortgage difficult
  • He did extensive research in all areas of mortgage lending and found a national lender that did not have any overlays and finally got his home loan approved and closed
  • His hands-on experience with the mortgage process motivated Gustan Cho to get his NMLS mortgage loan originator’s license and pursue a career as a licensed mortgage loan originator
  • Gustan Cho’s passion for helping people realize the dream of homeownership become a reality has motivated him to be the best of the best in the mortgage industry

Our loan officers at The Gustan Cho Team all share the same goals as Gustan in helping homeowners realize the dream of homeownership become a reality.

Home Mortgage Programs Offered At Gustan Cho Associates

Gustan Cho Associates is a mortgage company licensed in multiple states with no lender overlays on government and conventional loans. Gustan Cho Associates is known with a national five-star reputation being a one-stop mortgage shop due to having every alternative and non-QM mortgage program in today’s market. We are affiliated with over 50 wholesale lending partners:

  • Licensed in multiple states
  • FHA Loans with no overlays
  • VA Loans with minimum credit score requirement or maximum debt to income ratio caps and no overlays
  • USDA Loans with no overlays
  • Jumbo Mortgages
  • Reverse Mortgages
  • FHA 203k Rehab Mortgages
  • Non-QM Loans
  • Mortgages one day out of bankruptcy and foreclosure
  • Stated income P and L self employed mortgages
  • Non-QM Jumbo Loans
  • Bank statement mortgages for self-employed borrowers with no income tax returns
  • Conventional Loans no lender overlays

Mortgage Loan Applicants with under 620 credit scores looking for a lender with no overlays and just go off DU/LP Findings per Automated Underwriting System and are looking please contact us at Gustan Cho Associates. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays. Borrowers with any loan scenario questions, contact us at 800-900-8569 or text us for faster response. Or email your mortgage inquiries at

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One Comment

  1. I have a pre-approval with a credit union (90 LTV, $1.6m @ 4.75, 12-month reserves). Need to see if you have a lower reserve and rate.

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