Becoming a homeowner is an experience like no other. While at times the process may leave you feeling stressed or overwhelmed, those feelings go right out the window when you finally get those keys to your new home. With several different stages, the underwriting stage is one of the most critical steps you will come across. 

Although you won’t approach this stage until nearly the end of the home buying process, this is what stands between you officially getting your mortgage. 

What is Underwriting?

Underwriting is a key function that helps keep the financial world turning. The term underwriter stems from early practices where individuals would write their name under the amount of monetary risks they were willing to obtain. During the underwriting process, certified individuals will thoroughly research and assess the risk that is associated with giving applicants a financial loan. This process helps protect lenders by assuring borrowers can afford their potential investment.

An underwriter is ultimately the person who stands between you receiving your mortgage. While underwriters typically work behind the scenes, this doesn’t mean that you will not be involved in the process. If your documents are incomplete, missing, or filled out incorrectly, your lender may reach out to you during the underwriting stage.

What Steps Are in the Underwriting Process?

Now that you understand the basics of what an underwriter is and what happens during the underwriting stage, we can cover the steps they take in reviewing your documents. To figure out if a borrower qualifies for a loan, underwriters examine something many like to call the three C’s: credit, capacity, and collateral.


While they are examined, it’s important to know that credit scores don’t directly reflect your current financial situation. Instead, credit scores do show the amount of debt you’ve accumulated, how long you’ve had it, and if you make consistent payments. Underwriters will look through your payment records and determine if you’d be able to pay back your mortgage.


Capacity refers to a borrower’s ability to repay a loan. Debt-to-income ratio (DTI) gives your lender a perspective on how much you spend in comparison to how much income you bring in. This percentage can be used to help gauge your cash flow. This is important because it can give an accurate reading of if you can cover your monthly mortgage payment or not. 

Focusing on your assets and your income, an underwriter will evaluate the ability you have to take on a mortgage. Their main concern here is to ensure a borrower is in a good spot financially to take on a loan. When looking at your income and employment history, underwriters look for around two years of constant income. For those who are self-employed, you may need to provide additional documents. From there, underwriters will look at your assets and make sure you have cash in the bank that will cover your loan, closing costs, and other fees. Furthermore, your underwriter will examine your liabilities including debt or financial responsibilities such as child’s support. Here they are looking to see if you can afford a loan now and down the road.


Collateral refers to the interest of the acquired property which is to be guaranteed as collateral for the loan. To help protect lenders, underwriters want to ensure that borrowers can cover the amount in the event of default. Examining the value of the home you’re looking to buy is an essential part of the underwriting process. This is where appraisals come into play. Appraisals give underwriters an accurate assessment of the condition and value of a home. In addition to the appraisal, a property survey, which outlines the land and the placement of the home is also reviewed.

Following that, a title insurance company shows underwriters whether there are no unpaid taxes, liens, or judgments on the property. Last but not least, underwriters will consider and determine whether or not you will be able to cover your down payment. Depending on your percentage, the larger your down payment, the less risk that is associated with your lender.

Tips for a Smooth Underwriting Process

To ensure you get through the underwriting process as smooth as possible, below are three tips you should keep in mind.

  • Make sure all of your documents are in order
  • If your underwriter or lender ever reaches out to you always respond in a timely manner
  • Stay away from applying for other loans or credit during the underwriting

The Decision

The last stage of the underwriting process is the decision. Once your underwriter has thoroughly reviewed your application, they then decide on what category to put you in. Decisions range from, denied, suspended, approved with conditions, or approved. Below is a breakdown of each decision option.

  • Denied: If your application is denied, you can reach out to your lender and see the exact reason why. You may have too much debt or maybe your credit score played a factor. While those are just a couple of examples, once you figure out why your application was denied you can work to improve what was lacking and sometime in the future you can re-apply.
  • Suspended: An underwriter may deem your application as suspended if some documents are missing. Without all the proper documentation, underwriters cannot thoroughly evaluate your application. Another reason your decision can be suspended is because your employment could not be confirmed. After providing additional information, your lender should reach out to you and let you know if you can reactivate your application.
  • Approved with conditions: This means that your mortgage is approved but conditions such as additional forms like pay stubs may be needed to fully be approved.
  • Approved: When all of your paperwork is present and the financial risk of giving you a loan is deemed acceptable then you will be approved for a loan.

Once you’re fully approved you can then move on to the final stage of the home buying process which is the closing stage. While the speed of this step is a case-by-case basis, it’s important that you are proactive and responsive to your lenders when and if they reach out to you. Have any additional questions about the home buying journey in general? Feel free to reach out to one of our expert loan officers!

The included content is intended for informational purposes only and should not be relied upon as professional advice. Additional terms and conditions apply. Not all applicants will qualify. Consult with a finance professional for tax advice or a mortgage professional to address your mortgage questions or concerns. THIS PRODUCT OR SERVICE HAS NOT BEEN APPROVED OR ENDORSED BY ANY GOVERNMENTAL AGENCY, AND THIS OFFER IS NOT BEING MADE BY AN AGENCY OF THE GOVERNMENT. This is an advertisement. Prepared 4/8/2020