What Is Underwriting? ( What You Want To Know Wednesdays )

The Consumer Financial Protection Bureau (CFPB) enacted rules to protect borrowers after the housing crisis in the 2000’s. These rules require lenders to be 100% sure that a borrower is qualified for the loan they are acquiring. As a result, verifying that the information you put on your application is completely factual is the main priority. The underwriter will check your information and make sure there are supporting documents. A team member will call your employer and make sure that you are employed and are paid what you say you are paid. Right before the loan is ready to fund another phone call is made to your employer to make sure you are still actively employed. A loan will not fund if you have changed jobs, or quit. If you are self employed you may have to supply a lot more documentation than someone who is not.

A lender wants to make sure that the price of the property you are buying is comparable to the values of similar values. An independent appraiser will come in and determine the value of the property using a physical inspection and comparable properties in the neighborhood. The findings of this report could affect the rate and terms of your mortgage. An appraisal normally costs $300-$500.

The legal history of the property you want to buy is just an important as the physical appearance. Once the appraisal has been completed a title company will research the history of the property to see if there are any problems, such as; mortgages, claims, liens, easement rights, zoning ordinances, pending legal action, or unpaid taxes. Once all this information has been verified the title company will issue a policy guaranteeing the accuracy of the work. This policy will protect the lender, and in some cases, one will be issued to the property owner as well.

Flood insurance is not part of a standard homeowner’s insurance policy. The lender will hire a specialist to determine if the property is in a flood zone. If you are in a flood zone you will be required to purchase flood insurance.

Once underwriting is complete, the loan is ready to go to docs and then funding.


* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.