Understanding the Mortgage Underwriting Process

Jessica Light
Couple preparing for mortgage underwriting process

The underwriting process for a mortgage loan can be intimidating and overwhelming if you’ve never been through it. There are many things to consider and it can help to understand what underwriters need to make a lending decision, which factors come into play, and what you can do to streamline the process.

At SIRVA Mortgage, we believe in making the mortgage underwriting process as painless and easy as possible. There are things you can do before your loan reaches the underwriting stage to prepare everything needed to obtain the loan to buy your new home. Here are some pointers to help.

Learn What Mortgage Underwriters Do

Lenders hire underwriters to evaluate mortgage applications and determine the creditworthiness of the applicants. The mortgage lender you work with will assign a mortgage underwriter to review your loan application and decide whether you meet the qualifications to be granted a home loan.

What you should know as a borrower is that it is the underwriter’s job to protect the lender’s position by minimizing the risk that a borrower might not meet their obligations under the mortgage agreement. Their process includes checking your credit history, reviewing your existing debt, and verifying that you have the income necessary to make your monthly mortgage payment.

While most of the underwriting process focuses on the borrower, there is an element that relates to the value of the property as well. The underwriter will complete a comprehensive review of your property’s appraisal to determine two things. First, they need to ensure that the home’s value is supported by comparable properties. Second, they must determine whether there are any conditions that might affect the property’s marketability or livability. 

Your application may be evaluated with a combination of manual underwriting and automated underwriting. Automated underwriting might be used to calculate your debt-to-income ratio and other metrics. The manual element of the loan approval process is where the underwriter will review your application using the lending institution’s underwriting guidelines. Many lenders use elements of both automated and manual underwriting.

The Four Cs of Mortgage Underwriting

Before you apply for a mortgage, it is helpful to understand that there are four categories of information that underwriters review to decide whether to approve your mortgage loan. 

  1. Credit. Lenders will look at your payment history to see if you have a record of paying your bills on time. They also want to know how much of your available credit you are using. That’s why pulling your credit report is an important part of the underwriting process.

  2. Capacity. The underwriter will review your income and employment history, monthly debt payments and other financial obligations to ensure that you will be able to make your monthly mortgage payments.

  3. Capital. A review of your readily available funds and savings, including property you own, investments, and other assets that may be easily liquidated, tells the underwriter that you manage your money responsibly and have access to funds to pay your mortgage.

  4. Collateral. The property you are buying is used as collateral for the mortgage loan. The underwriter will review the appraisal of the property being used as collateral to determine if its value is sufficient to allow them to recoup their money if necessary. If the property is appraised for less than your offer, the lender may not be comfortable loaning you the money you need.

A review of the four Cs helps mortgage underwriters get a complete picture of an applicant's finances and their ability to meet the financial obligations of the mortgage.

Begin the Mortgage Underwriting Process

Once you have made an offer and the seller has accepted it, your Loan Processor will give you an updated underwriting checklist that includes all documents and information needed for the initial mortgage underwriting process. If you have already been verified pre-approved for a mortgage, the list should be short and it should not take you long to provide what is needed.

At the same time that you receive the checklist you will receive a Disclosure Package with documentation for you to review and sign. This is a good time to read through everything to ensure you understand the terms of the obligation and ask the Loan Processor any questions you may have about the underwriting of your mortgage.

When you review the items on your updated checklist, you should make sure to promptly provide everything your Loan Processor has requested. We also suggest that you review the documents before you provide them to make sure they are complete. For example, you will need to provide all pages of your bank statement(s) and investment account statements, even the blank pages if they are numbered. Being thorough at this point will reduce the likelihood of delays in underwriting and approving you for the mortgage you need.

If you have any unexplained large deposits that are not reflected on your W-2s, you will be asked to provide a written explanation for them. Your underwriter will need to know the source of all non W-2 income. If you are self-employed or have a side gig, you will be required to provide other tax documents to support income from those sources. For example, you may receive 1099 forms if you do contract work. Try to remember the 4 Cs and why underwriters need this documentation, and be proactive in providing it to avoid delays.

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The Three Potential Outcomes of the Mortgage Underwriting Process

There are three potential outcomes of the underwriting process. Two are final, while the third may be temporary and require you to provide additional or updated information to enable the underwriting of your loan to move forward.

The first and most desired outcome is approval. An approval means that the underwriter has determined that you have the financial capacity to meet your obligations, a solid credit history, the capital to make payments, and the collateral to minimize the lender’s risk. Keep in mind that in some cases, an approval may be conditional and ask you to meet certain requirements before the closing.

At the other end of the spectrum is denial, which means that the underwriter has determined that you do not have the credit, capacity, collateral, or capital to meet your obligations as well as the mortgage loan. The lender isn’t comfortable with the level of risk involved in lending you the money for a home at this time.

The third option is a suspension of the underwriting process. A suspension usually means that something is missing from the application and the underwriter can’t proceed with a credit decision. Some of the most common reasons for suspension include the following things:

  1. Bank or investment account statements have missing pages or incomplete information.

  2. The information provided, including pay stubs and asset statements, is stale and needs to be updated to the most recent information.

  3. Copies of tax documents must be signed and dated.

  4. An unexplained large deposit or income source needs to be explained.

  5. The underwriter needs more information from the property appraisal.

The good news with a suspension is that it isn’t a denial. You can move the process forward by providing any requested documentation as quickly as possible.

Avoid Doing Anything to Derail the Underwriting Process

After you have submitted all documentation, it is important not to do anything that would change your financial situation. Mortgage underwriting decisions are based on the information you submit and you should keep your status the same until you close your loan.

There are some common mistakes that people make during mortgage underwriting. You should avoid doing the following things:

  • Making any large purchases that will impact your savings or credit report. For example, this is not a good time to buy furniture for your new house or to upgrade your car. If you use cash, big purchases will decrease your savings. If you use credit, they will increase your balances and debt-to-income ratio and may also impact your credit score.

  • Applying for any new credit. Each time a potential lender checks your credit report, it lowers your credit score by a few points.

  • Closing any of your existing credit card accounts. Closing accounts, even if you don’t currently use them, can negatively impact your credit because they decrease the amount of credit available and can make it look like you are using more of your credit than you are.

Think of the underwriting period as a time to hold steady as your credit will be checked again prior to closing to look for any changes. Your underwriter will strive to get you approved as quickly as possible.

Be Communicative and Responsive to Your Underwriter

Even if you are diligent in gathering all the documents requested in the underwriting checklist, your Loan Processor may still have questions for you. One of the most important things you and any co-borrowers can do to streamline the mortgage underwriting process is to make yourselves available to answer questions.

If you get a call from your Loan Processor, make sure to return it as quickly as possible. Any time your underwriter requests additional information, it means they need it for evaluating your application. Delays will only lengthen the process.

We also strongly encourage all mortgage applicants to be communicative if something changes in their financial situation. Even people who are careful in their financial planning may encounter circumstances beyond their control. If that happens to you, your Loan Processor needs to know about them.

Not all changes will have a negative impact on the underwriting process. For example, you might get offered a new job with higher pay than you’re earning now. Presenting your offer letter to the Loan Processor might improve your chances of approval because it increases your ability to make monthly mortgage payments.


The mortgage underwriting process can be both exciting and anxiety-inducing for borrowers. The guidance we have provided here is designed to help you prepare for underwriting, gather necessary documents and information, and understand what to expect to make the process as smooth and stress-free as it can be.

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