How Does the Mortgage Underwriting Process Work?

While underwriting is a crucial step in the homebuying journey, it’s not as scary as it sounds.

If you’re new to the world of mortgages, you may be unfamiliar with some of the lingo. The term “underwriting,” for example, can be a bit intimidating. After all, it’s the process a lender uses to determine whether you qualify for a mortgage, so hearing the word can make any homebuyer a bit nervous.

While underwriting is a crucial step in the homebuying journey, it’s not as scary as it sounds. Let’s explore the term a bit more and explain how you, as a borrower, can help ensure the underwriting experience is a pleasant one.

What is underwriting?

When you first meet with your lender, they will likely discuss your financial situation and budget, as well your short- and long-term goals. You’ll provide information about your credit, debt, income, and assets, and based on this general financial picture, your lender will provide an estimate of how much you may be able to borrow. This step is often called prequalification. Getting prequalified gives you a sense of your financial readiness and it introduces you to available mortgage options.

A mortgage preapproval goes a step further and it’s where the underwriting process begins. You will fill out an official mortgage application, and the information will be sent to an underwriter who will determine what you qualify for based on a full credit check and a thorough review of financial documentation, including pay stubs, tax returns, W-2s or 1099s, bank statements, retirement or brokerage account statements, proof of other forms of income (real estate, child support, alimony, etc.), and any other relevant information.

“The underwriter reviews any and all documentation pertinent to the loan to ensure that the borrower’s financial profile — and eventually the property they are purchasing — meets the guidelines set by the specific loan program,” said Wayne Lacy, branch manager of Cherry Creek Mortgage.

Keep in mind that once you’re preapproved, it is generally considered a conditional approval or a conditional commitment to lend. There is still a big piece of the underwriting process yet to complete — an evaluation of the property (collateral). Because anyone’s finances can change at any time, underwriters must evaluate whether the property you want to buy is valuable enough to repay the loan in case of a foreclosure. When you make an offer that’s accepted and you provide a valid purchase agreement, your lender will request an appraisal of the property in order to complete the underwriting process.

How long does underwriting take?

Underwriting can take a few days or a few weeks, but the length of the process can vary depending on your particular situation. Lacy says there are things borrowers can do to keep the process moving along.

“Be open and honest with your lender when it comes to your financial situation and be as detailed as possible with information like dates because timing can often make a difference,” he said. “For instance, let’s say you received a promotion at work. If you’ve been in the new position for 8 months, we have enough documented history at that higher pay. But if you’ve only been in the position for 6 weeks, we don’t have as much to go on, and you may not be approved for your desired loan amount.”

Borrowers can also keep things moving by promptly responding to inquiries. During underwriting, your lender may request additional financial documents, bank statements, other proof of income or assets, etc. Make sure to get back to them as quickly as possible because the underwriter can’t proceed without them.

Once you receive your initial preapproval, don’t do anything that will affect your credit or income until after closing. A new credit card, delinquent payments, a new car lease…any of these things will be caught by the underwriter and may result in your loan being denied.

What happens after my loan goes through underwriting?

Once the underwriter processes and verifies all information, they will decide to approve, suspend, or deny the mortgage. With an approval, everything is good to go. However, in many cases, the underwriter will approve a loan with conditions. This means you need to answer some questions or provide additional documentation for your loan to be submitted for final approval.

“I had a client who was moving here from another state, but she didn’t have her transfer letter yet,” said Lacy. “She was approved, but under the condition that she provide that information. I also had a client who was on maternity leave for seven months, which impacted her income for that year. The underwriter approved the loan, but we needed to provide an explanation as to why her income was different during that time period.”

If your mortgage application is suspended it is typically because documentation is missing from your file and the underwriter can’t make a full evaluation. For example, your application could be suspended if the underwriter is unable to verify your employment or income.

If your mortgage is denied, the underwriter is required to provide an explanation. A job change, an unexplained cash deposit, a new line of credit…these are all reasons why a mortgage may be denied. However, by working with a local, trusted lender, you can reduce the chance of that happening.

“If there are issues in your financial profile that could impact your ability to be approved, we will likely catch it during the prequalification and preapproval stages, especially if you are transparent and upfront,” said Lacy. “Whether it’s just collecting additional documentation, or maybe waiting for a bit while you work on improving your credit, we can put together a plan to get you approved in the future.”

For a list of reputable area lenders who can guide you through the mortgage process, visit the Greater Lansing Association of REALTORS® website at

This article originally appeared on Lansing State Journal: How Does the Mortgage Underwriting Process Work?