The first step is to fill out an application online, over the phone, or in person. When you apply for a mortgage, you are giving your lender permission to cancel your credit, review your financial information, request a home appraisal and start a title search. When you fill out a mortgage application, you must provide your income, assets and debts. Most lenders also request documents to verify this information, such as W-2 forms, pay stubs, and bank statements. Underwriting occurs when a member of the mortgage team, the insurer, analyzes your personal financial information to assess whether or not you meet the mortgage lender's criteria and if it matches the requirements of the type of loan you are applying for.
In this case, the insurer tries to ensure that you have enough money to cover future mortgage payments, in addition to your current obligations. Before you sign up, a loan officer or mortgage broker collects credit and financial information for your application. Mortgage underwriting is part of the loan approval process and verifies if your finances and the home you are going to buy justify the mortgage that you want. Now that they've explained the mortgage underwriting process to you, you'll be better prepared to apply for your own mortgage.
Large deposits, defined by Fannie Mae as a single deposit that represents more than 50% of your monthly income eligible for a mortgage, must have documentation showing that the money comes from an acceptable source. Unfortunately, many mortgage companies handle the underwriting process once you've found the home you want to buy, submitted an offer, and then applied for a mortgage. Mortgage underwriting takes place after you and the seller sign a purchase and sell agreement and you officially request a Mortgage. Mortgage underwriting is the process used by the lender to determine if they approve your mortgage application.
Pre-approval of a mortgage involves a lender reviewing your finances and calculating the mortgage they expect to offer you. Many lenders closely follow the underwriting guidelines issued by Fannie Mae and Freddie Mac, the two government-sponsored entities that back and purchase mortgages in the secondary mortgage market. Mortgage underwriting is the process used by a lender to determine if the risk of offering a mortgage loan to a particular borrower under certain parameters is acceptable. They also consider your assets, such as savings accounts, to ensure that you can afford your down payment and that you have enough money left to pay your monthly mortgage premiums.
Mortgage insurance insures the lender against losses that can occur when a borrower fails to pay their mortgage. They will review your liquid assets to make sure that if, for any reason, your income doesn't cover the cost of the mortgage loan, you have money saved that you can use to pay for it.