3 Things To Know About Underwriting In The Mortgage Process

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When your bank tells you that they are preapproving you for a mortgage, this means that you appear to meet all the standards and conditions needed for a loan. While this can be exciting news to hear, you should also understand that before the lender will actually give you the loan, it will have to go through underwriting. If you are new to mortgage loans, here are several things to understand about underwriting with loans.

Underwriters thoroughly check every detail about your application

Underwriting refers to a department of people who have the job of thoroughly checking, verifying, and analyzing all the details from a mortgage loan application. They do not receive the file for a person until the person makes an offer to buy a house and receives notification that the seller accepted. When this takes place, the mortgage lender sends the file to underwriting, and they begin their job.

As they are evaluating a file, they will look up past information about you, as they are looking to make sure that everything you included on your application is correct. They will also look up details about the house you are buying to make sure you should receive the amount of money the lender is giving you for the house loan.

They are primarily looking at risk levels

The main role of underwriters is to determine risk level. If the underwriters find that everything checks out fine on the application, and that everything looks good, the person might have a very low risk level. If the underwriters begin finding details about the person's finances and credit that were not on the application and that are negative, it could put the person at a high risk level. When the bank gets this information back from the underwriters, they will have to decide whether to approve the loan and issue it to you, or decline offering the loan. This is often based on risk but it can also be based on other factors.

You could lose qualifying for a loan through underwriting

One of the most important things to know is that you should be honest on your application so there are no surprises in underwriting, as you could lose your ability to get a loan if things do not check out.

While a preapproval for a loan helps you get one step closer to buying a house, it does not guarantee the loan. Your information must get approved through underwriting, too, before the lender will issue you the loan. If you have questions or would like to apply, contact home mortgage services today.

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