So you’ve submitted your mortgage application to your lender. What happens next? It will be seen by several people, including the loan processor and underwriter. The loan processor will gather all of the related documents necessary to analyze the application. The underwriter will make sure the details of your loan and loan documents meet the lender’s guidelines. To know how the underwriter makes the final decision to approve or deny your loan, you must understand what takes place during underwriting.

The main task of the underwriter is to assess your risk as a borrower and determine your ability to repay the mortgage. Underwriting consists of examining the following:

Income and Employment

During underwriting, both your income and employment will be verified via phone, fax or mail through your employer or recent tax returns. Generally, you must have two years of consistent employment. Your average income will be calculated, analyzed and used to determine your debt-to-income ratio (DTI). This means your income must be able to cover your existing debts and new mortgage with funds left over for other expenses. 


AssetsUnderwriters also verify your assets, such as savings, checking account, 401k and IRA accounts. These totals help the underwriter determine if you have enough of a financial cushion in the event that a hardship occurs. It also shows your history ofsavings and the way you handle money.


Your credit is one of the most important factors in determining loan approval. When examining your credit report, the underwriter can see how you manage repaying your debts, such as car loans, credit cards, student loans, etc. It also shows the underwriter if you have too much debt in addition to the pending mortgage. This helps predict your ability to repay your mortgage on time and in full.

Property Value

In order to make sure the mortgage amount doesn’t exceed the property’s value, the underwriter will examine the home’s appraisal report, which shows the current home value. Among other things, the appraisal report helps ensure you aren’t paying too much for the property and protects the lender from lending too much money. In addition, the type of property you’re buying may carry certain risks for the lender, such as an investment property. In the event of financial difficulty, a borrower who purchased an investment property may default quicker than one who purchased a primary residence.


When all of these factors have been analyzed, the underwriter can make a determination as to the riskiness of the loan. Providing all the necessary documentation helps the underwriter do the job more efficiently. Keep in mind, the process can take anywhere from a few days to a few weeks based on the complexity of the loan and the due diligence required.

Everything doesn’t have to be perfect for the underwriter to approve the loan. A strong income, large down payment and savings could offset any credit issues that a borrower might be dealing with, while good credit and income can offset a low down payment. Underwriting is all about the financial stability of the borrower versus the amount of risk to the lender.

If you’re thinking of submitting a mortgage application, a ditech Home Loan Specialist can help you determine the right mortgage for your situation and the documentation needed for underwriting.

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