What is Underwriting and Why Does My Home Purchase Need It?

Buying a home is a big step. Once you have a purchase contract in hand, the process turns over to your lender. You will work with your loan officer to get approved for the home loan, called a mortgage. You will likely hear about the underwriters and what they need. What is underwriting and what role does it play in approving a home purchase?

What is underwriting?

Underwriting is a loan term for the detailed process of collecting and evaluating your financial history to determine your ability to pay back the loan.

Each lender can determine individually how much information they need, but it is often dictated by the underwriting process. Common required documents include:

• Bank statements, usually a few months
• W-2 or 1099 to show income history
• Tax returns
• Investment income records
• Liabilities, such as car loan, student loans, or credit card statements

Should I contact the underwriters?

As the buyer, you will likely work directly with your loan officer or processor, who will turn all of your documents over to the underwriters on your file. The underwriters are financial experts and analysts you will look over the information that you provide, as well as evaluate independent information such as your credit score.

It is best to communicate directly with your loan officer or the person who is the lead on your file. Keeping all communication through one person can keep things flowing smoothly. Make sure to respond to their inquiries as quickly as possible and provide all documentation in a timely manner to make their job easier.

Applying for new lines of credit or moving large sums of money around in your accounts during the underwriting process can slow things down. As the underwriters try to get an accurate, detailed picture of your financial situation, you should try to keep things simple. Keep up with paying your routine bills and payments, but try to avoid making significant changes to your financial picture. If you do (such as making a large payment to an existing loan), be prepared to explain the action and provide new statements.