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.
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.
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.
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.
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.