What is Underwriting?

  • July 14, 2015

What is underwriting and why is it necessary in obtaining a mortgage loan?
Underwriting is the process a lender uses in order to ensure you are a qualified borrower and that you have the means and intent to fully repay your loan. During this step of the loan process, an underwriting expert looks at a borrower’s credit, collateral, and capacity to repay. These professionals dig deep to verify where your money is coming from and your financial history.
Underwriters are like the security team for lenders. If you can’t prove your creditworthiness, they do not allow you access. Standards for a loan application are typically higher than a loan pre-qualification letter. So while a borrower may have been “approved” for a certain amount on a pre-qualification letter, this number could change one the qualified underwriter has reviewed various financial items.
The appraisal of the home is included in underwriting. It gives the underwriter all the details as it pertains to a loan, from the borrower’s financial background to their financial future. Taking into account the home being purchased, the underwriter is able to accurately assess if the borrower is in a secure position to borrow money and repay it for a certain amount on a certain home.
Perceived risk is a key factor the underwriter looks at. Their job is to determine the perceived risk a borrower has if a lender loans them money. If the risk is too great, a loan will likely be withheld, or at least not granted for a significant amount.
It is important for the lender to consider the whole picture when providing a loan to a borrower. While the underwriting process may seem tedious and can be uncomfortable as it is very involved, it is an extremely critical step that needs to be taken in order to protect the lender and their money.
Have questions about how the underwriting process works? Talk to your trusted mortgage professional today to learn more about this step and its importance in your homebuying success.

  • Facebook Icon
  • Linked In Icon
  • Twitter Icon
  • Google Plus Icon

Latest Tweets

© CMG Financial, All Rights Reserved. CMG Financial is a registered trade name of CMG Mortgage, Inc., NMLS ID #1820 in most, but not all states. CMG Mortgage, Inc. is an equal opportunity lender with corporate office located at 3160 Crow Canyon Road, Suite 400, San Ramon, CA 94583 888-264-4663. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act No. 4150025; AK #AK1820; AZ #0903132; Colorado regulated by the Division of Real Estate; Georgia Residential Mortgage Licensee #15438; Illinois Residential Mortgage Licensee; Kansas Licensed Mortgage Company #MC.0001160; Massachusetts Mortgage Lender License #MC1820 and Mortgage Broker License #MC1820; Mississippi Licensed Mortgage Company Licensed by the Mississippi Department of Banking and Consumer Finance; Licensed by the New Hampshire Banking Department; Licensed by the NJ Department of Banking and Insurance; Licensed Mortgage Banker – NYS Department of Financial Services; Ohio Mortgage Broker Act Mortgage Banker Exemption #MBMB.850204.000; Licensed by the Oregon Division of Financial Regulation #ML-3000; Rhode Island Licensed Lender #20142986LL; and Licensed by the Virginia State Corporation Commission #MC-5521. CMG Mortgage, Inc. is licensed in all 50 states and the District of Columbia. Offer of credit is subject to credit approval. For information about our company, please visit us at www.cmgfi.com. To verify our complete list of state licenses, please visit www.cmgfi.com/corporate/licensing and NMLS Consumer Access (http://www.nmlsconsumeraccess.org/EntityDetails.aspx/COMPANY/1820).