Underwriter And Underwriting Process
The mortgage underwriter is the most important person in the mortgage application and approval process. The most important person in the mortgage application and the mortgage approval process, the underwriter, is the person you will never talk to nor meet. The mortgage loan underwriter is the person that determines whether to approve your mortgage loan application and issues the clear to close. The clear to close, also referred to as the CTC, means that the mortgage lender is ready to fund. A mortgage underwriter’s role to make sure that every mortgage loan application under review meets not just the federal minimum mortgage lending guidelines set by HUD, FANNIE MAE, FREDDIE MAC, VA, and/or USDA but also must make sure that the mortgage loan application meets the lender’s internal mortgage lending guidelines, which are called mortgage lender’s overlays.
Role Of A Mortgage Underwriter
The role of a mortgage underwriter is to make sure that the mortgage applicant meets federal mortgage lending guidelines as well as the mortgage lender’s overlays. The role of a mortgage underwriter can be as simple as making sure that the figures are correct and verified and make sure that the mortgage loan that the mortgage lenders funds can be sold to the secondary market after the mortgage loan closes and funds. One mistake overlooked by the mortgage underwriter can mean that the mortgage lender cannot re-sell the mortgage loan to Fannie Mae or Freddie Mac. If the mortgage lender cannot re-sell the mortgage loan that they fund to Fannie Mae or Freddie Mac, that means the mortgage lender needs to hold the mortgage loan in their books and cannot relieve their warehouse line of credit. The role of a mortgage underwriter is to make every effort to make sure that the mortgage loan applicant is qualified and is able to afford the new mortgage loan and that the mortgage loan does not default.
Mortgage Lending Guidelines
The first and most important mission for a mortgage underwriter is that the mortgage loan applicant meets minimum federal mortgage lending guidelines. The role of a mortgage underwriter is to review the mortgage loan applicant’s income, credit, credit scores, credit history, liabilities, assets, and overall credit and financial profile, both the past and current. The role of a mortgage underwriter is to make a judgment and decision if the underwriter issues a mortgage loan approval, that the mortgage loan borrower can make their mortgage payments timely and that the mortgage loan borrower will not foreclose on the home. Past performance is indicative of future performance and that is why the past credit history and employment history is closely reviewed. The mortgage loan applicant needs to show that he or she has been making timely payments which is reflected on the mortgage loan borrower’s credit report via his or her payment history. The mortgage loan applicant minimum monthly debt obligations must meet the maximum debt to income ratio requirements that is mandated by both federal lending guidelines and the mortgage lender’s internal mortgage lending overlay requirements.
The mortgage underwriter will need to verify assets that need to be used for the home buyer’s down payment and closing costs and make sure that those funds are properly seasoned ( 60 days seasoned in the applicant’s bank statements ). Any irregular deposits within the past 60 days needs to be sourced. For example, if a mortgage loan applicant has an irregular deposit from a sale of a car or other high ticket item, the copy of the check as well as a bill of sale will be required in order to be able to use the $1,000 deposit as verified assets.
Income needs to be documented income. Cash income does not count in the mortgage business. Part time income, overtime income, and bonus income can be used if the mortgage loan applicant can show a history of two years of steady part time income, overtime income, or bonus income.
Other Role Of A Mortgage Underwriter
The role of a mortgage underwriter is to oversee the whole mortgage file which includes reviewing the appraisal, make sure the home buyer has sufficient coverage to protect the lender, make sure that there is no cloud in the title, and that the mortgage loan can be sold to Fannie Mae and/or Freddie Mac after the mortgage loan funds and closes. The mortgage loan underwriter will have the final say on the mortgage approval and ultimately is the person that issues a clear to close.