What Do Underwriters Actually Do Anyway?

By: Scott Shenton, Mortgage Banker

For anyone who’s been through the mortgage process, particularly in the current regulation-heavy environment, they may feel that underwriter’s only purpose is to be difficult. Although it may feel that way sometimes, underwriters actually are the superheroes of the mortgage industry. 

To appreciate why underwriters are so indispensable, it’s important to first understand a few of the underlying processes in the mortgage industry. No matter which institution you choose to do your mortgage, it’s a near certainty that that loan will one day be sold to a different institution. This buying and selling of mortgages is collectively referred to as the “secondary market”. It’s this buying and selling of mortgages, that enables institutions to continue to have funds to lend and without this market, the entire system would come to a screeching halt. For a mortgage to be considered viable on the secondary market, it must be structured and delivered in a way that proves that it is indeed a good investment (adequately low risk) and is consistent with industry standards.

  

This brings us back to the heroes of this story, the underwriters. Loans are delivered to underwriters complete with a large collection of supporting documents intended to prove a borrower’s income, ability to repay the loan, credit worthiness and the circumstances in which they are purchasing the property. An underwriter’s job is to then look at the big picture and ask the difficult questions.  Is the borrower’s income consistent and stable? Are the borrowers using the property as a primary residence, 2^nd home, or investment? Are all debts being taken in to consideration when determining a borrower’s ability to repay the loan? Does the loan make sense, and will it be purchased by an investor?

Underwriters are expected to pose questions that may impact the loan’s marketability and request additional documentation to answer these questions. When an underwriter has done their job well, the loan will easily be sold and will continue on, issue free. It’s this step that keeps the secondary market, and ultimately the mortgage industry plugging along.

So take it easy when answering an underwriter’s request for additional information and thank them. They keep homebuying possible. Want additional information about the homebuying process? Request a copy of our homebuyer’s guide or apply online.

7 Tips On Getting A New Mortgage After Bankruptcy

You have found your dream home and you are eager to get a mortgage, move into the property and start enjoying life there. However, there is only one problem standing in your way – the fact that you have been through some hard financial times in the past.

If you (or your partner) have been bankrupt previously, will this affect your chances of being able to buy the home you want?

The good news is that it is still possible to obtain a mortgage even if you have been bankrupt before.

Here are some tips that will help you to increase your chances of mortgage success:

• Choose the right lender. Some lenders may not approve your new mortgage if a bankruptcy shows up on your credit history. However, there are some that do as long as you are able to prove that you have the income to make your payments.

• If your bankruptcy was caused by factors that are beyond your control, it may be easier to get a new mortgage as opposed to a bankruptcy that was caused by poor money management. Explain the circumstances of your credit history to your mortgage loan officer.

• When you are buying a home after bankruptcy, try to save up as much of a down payment as possible. Your lender may want to see a minimum of 10% as a down payment, but more is better.

• Build up your credit again by always paying your credit card bills each month along with any other debt. The higher your credit score, the better chance you will have of being able to obtain a mortgage.

• Avoid writing checks that you think might bounce, as this shows up poorly on your credit report as well. Any retirement plans or 401 K assets will make your credit look good, so if you can set these up it may help you to obtain a mortgage.

• Don't switch jobs right before applying for the mortgage, the lender wants to be able to see that you have a reliable source of income and that you have been at the same line of work for a good amount of time.

Keeping these tips in mind will help you to obtain a mortgage even if you have been bankrupt before.

For more information about buying a home and securing your next mortgage please contact your trusted mortgage professional today.