What Does My Client’s Underwriter Do?

Last month we started our newest Trusted Tools series, What does my client’s _____ do? This series aims to help you and your customers better understand the many different roles involved in the home buying and selling process. We’re sure you’ll agree, the more informed your clients are, the more confident and satisfied they’ll be when all is said and done.

Which brings us to this month’s featured role: The Underwriter. Some people may get intimidated when they hear the term “underwriter,” because they know that is the person who makes the final decision on whether a real estate deal can close or not.

The underwriter does play a huge role in the mortgage process. They review loan applications based on factors like capacity, credit history, capital and collateral in compliance with company policy, contracts, investor guidelines, lending programs and state and federal regulations. And yes, they ultimately render the final decision (approval, disapproval, approval with conditions) for mortgage loan applications.

Something most people aren’t always aware of is the fact that there are actually two rounds of underwriting during this process. And it’s during the initial underwriting phase that the underwriter first gets to work on a mortgage application.

During this initial underwriting, the underwriter will determine whether or not the loan can be approved and will lay out all of the requirements and documentation needed during the rest of the closing process to facilitate the final approval of the loan. Basically, this first round of underwriting ensures everything meets the bank’s investor requirements and that the borrower is able to, and likely to, pay back the loan.

After the initial underwriting comes the final underwriting – and this round is for all the marbles. After the initial underwriting, typically there are more requirements and documentation the underwriter needs to request regarding the property and the borrowers. Once all of that info has been provided, the underwriter can then begin the final round of review and make a decision.

Depending on the size of the file and how detailed the documentation is, the final underwriting review can take a couple of hours, it just depends on the details. However, once the underwriter has made a final decision to approve, disapprove or approve with conditions, it doesn’t take long to begin the final closing process and inform the buyers and sellers. From that point, the borrowers are one step closer to being able to get the keys to their new home and start settling in.

So, yes, “underwriter” can sound a bit scary, but there is typically nothing to fear about this vital role in the mortgage approval process. They do take their role very seriously in gauging the risk a bank or borrower is about to take on with a new mortgage, but as long as you and your client have provided all of the required info and documentation, the underwriting process should normally move along smoothly.