How to Underwrite a Mortgage Like a Bank

You might be familiar with the term but what does it really mean to underwrite a mortgage?

Mortgage underwriting is the process that takes place behind the scenes after your application is submitted. Lenders use this process to have a closer look at your financial background and credit to gauge your eligibility for a loan.

Below are the steps involved in the process of underwriting a mortgage.

1: Secure Your Prequalification

Prior to making a home purchase, consult several lenders to know how much you can borrow. It helps you determine the price you can afford and give you a good idea of the rates. Lenders often provide prequalification details in just a day or less with the use of basic credit and income data. But, there are also instances when prequalification may take up 2 to 3 days.

2: Get a Home Appraisal

The appraisal of your house is a significant aspect of the process of underwriting a mortgage and is often a contingency in the purchase agreement. Physical inspection of a house usually takes 3 hours or less although this can also take up to 2 days to one week before your lender sends you the appraisal.

3: Verification of Assets and Income 

During the process of mortgage underwriting, while the home appraisal takes place, your assets and income will also be verified. The process may take three weeks or even longer, which depends on how complex your situation or how you will answer the inquiries.

For instance, if you get your income from self-employment and you have to undergo an income audit, this step can be completed in 3 to 4 weeks.

4: Apply and Wait for the Decision

You will also need to officially apply for your mortgage loan and wait for the decision. It can take a day or two to get everything together and apply since these applications are a bit complex. The decision may take some time that can last up to 60 days that will depend on other factors.

5: Clear Up Any Contingencies

If ever the purchase agreement has some contingencies like a home inspection or a loan approval, you need to clear up all of these prior to closing. It could take one week or two or even longer to have all contingencies cleared up depending on the specific timeline.

6: Close on the House

So long as everything is in its proper place, you could expect to close on the house in a matter of two months from your purchase agreement’s date. The average time for closing on a home purchase may take 45 days or so. The actual closing will only take several hours when all necessary paperwork is in proper order and it is possible to verify the escrow.

The process to underwrite a mortgage like a bank is not really as complicated as it sounds. All you have to do is follow the steps above so you can have your mortgage is underwritten in no time and enjoy your new home right away.