Loan Processing and Underwriting
After you've turned in your mortgage application, including all necessary paperwork outlined by the lender, your information will be sent to the loan underwriting department. Underwriters will carefully review all of the details and documents you provide in order to assess your loan qualifications. In short, underwriters decide if you're going to get your loan.
Typically the process requires 20 full business days, from origination to closing. Underwriters will investigate:
Credit History: Are you in good standing with the three major credit bureaus?
Employment History: Is the information you provided about salary and employment correct?
Home Appraisal: Does your home sale price warrant your loan size?
Overall Perceived Risk: Does your debt load, current income and collective financial history make you a safe investment?
Sometimes underwriters stumble upon details in your application that require more information. For example, large non-payroll bank account deposits (totaling more than 10% of your income) must be sourced so the underwriter can verify the funds were not borrowed.
If the underwriter finds anything in your application that requires elaboration, they may request a letter of explanation from you. Letters of explanation provide an important opportunity for borrowers to explain why there are large deposits in accounts, overdraft alerts on bank statements, missed payments on credit reports, gaps in employment history and more.
Having some blemishes in your financial history may not destroy your ability to qualify for a mortgage so long as you're able to explain why they happened, and will never happen again. In order to keep the underwriting process smooth and improve your chances of approval, always cooperate with underwriting requests and respond in a timely manner.