Learning About the Underwriting Process

man signing papers

Within a standard mortgage process, there are elements that are handled directly between you and a lender, and there are elements handled by a third party. One of the most important processes within the latter area is called underwriting, and it’s one the brokers at Altius Mortgage and Mortgage Ogden are here to help with.

The underwriting process is present to ensure that you as a borrower have accurately and honestly represented yourself to the lender. It includes factors that may influence your ability to pay the mortgage back on time. Here are a few of the common areas an underwriter will look into, pus the tools at their disposal.

Clue Collection

A popular metaphor for underwriters is casting them as detectives, and in a financial sense this is mostly accurate. An underwriter uses all the tools available to them to take an objective look at your finances – pay stubs, credit reports, employment histories and tax returns, among other documents. Using all available information, the underwriter will come to a conclusion about whether you’ve been honest in your financial representations. Here are a few of the most important clues they’ll be investigating.

Credit

Your credit is the most important area an underwriter will use, as it allows them to look at both your financial present and past. Credit scores will raise any red flags, including bankruptcies or defaults. You’re not necessarily totally out of luck if an underwriter finds issues here – in some cases, you’ll be allowed to provide a letter of explanation to detail the circumstances leading to the problem.

Repayment Capacity

Simply, this is a debt-to-income ratio that’s used to ensure you’re able to pay the loan back properly. Capacity is determined by using monthly income set against current debt and future housing expenses. You’ll be required to provide full asset statements to the underwriter for this process.

Collateral

This is the area where an underwriter provides a fallback for the borrower – they check whether the price of the home is truly worth the pre-approved loan amount. They’ll order a home appraisal by an independent third party, during which any issues with the home can be brought up. In some cases, the underwriter saves a borrower from taking a lousy deal on a home.

If you want to learn more about the underwriting process or how our mortgage company can assist you with it, speak to the brokers at Altius Mortgage today.

Basic Mortgage Application Stages

couple talking with loan officer

At Altius Mortgage and our partners at Mortgage Ogden, one of the primary services our mortgage brokers provide is a thorough and complete walk-through of the mortgage process. A home loan is no small undertaking, and we want our clients to have a crystal clear idea of what they’re going to be facing as they get started.

One big element here involves the basic stages of the application process for a mortgage. These may vary slightly within a given situation, but in most cases there are three steps here: Pre-qualification, pre-approval and the final, binding loan commitment. Here are the basics on each of these three important application stages.

Pre-Qualification

Pre-qualification is a first step that often gets confused with pre-approval, which is actually different and comes later. Pre-qualification is less formal than pre-approval – more of a financial meet-and-greet, if you will.

To get started, you’ll provide a lender with very basic financial information like debts, income and basic assets. You won’t be assessed a credit report or any background checks – these will come later. During this stage, your lender is simply looking to get a very general picture of your finances. This is also a good time to ask any initial questions you have, plus go over your expectations and goals for the mortgage process.

Pre-Approval

Pre-approval follows a similar procedural format to pre-qualification, which is why they’re often confused. Pre-approval is the more formal stage, however – it’s more detailed, including background and credit checks performed, and it’s also more binding. In a situation where everything goes as planned, you’ll finish pre-approval with a written commitment for an exact loan amount from your lender. With this commitment, you can begin searching for homes within your range.

Loan Commitment

When you’ve matched your price range and found a home, it’s time for the loan commitment step. Your lender will go through one final check to ensure no big changes have taken place to your finances during the home search, and then all that’s left will be for you to provide your signature and move the process forward.

Want to find out more about the application process, or interested in any of our other mortgage services? Speak to the brokers at Altius Mortgage today.