Understanding the underwriting mortgage process

Underwriting mortgage is a mechanism that holds significance for lenders as well as borrowers

A mortgage is a common way to fund a real estate investment. But before approving your mortgage application, a lender evaluates your credibility through underwriting. Read on to know everything there is about this mechanism.

What is an underwriting mortgage?

Underwriting is the process by which a mortgage lender evaluates the risk of loaning money to you. Before approving your mortgage petition, the mortgage lender evaluates your repayment capability.

A loan consultant or mortgage agent gathers many documents required for your application prior to underwriting. Then, a mortgage underwriter validates your identity, runs a credit check, and evaluates your financial status. Your income, liquid assets, investment portfolio, financial assets, and risk considerations are factored in.

How does the underwriting process work?

The underwriting process assesses your financial situation and previous credit choices.

The factors involved in underwriting a mortgage are:

Income

While considering your underwriting mortgage, your underwriter must be convinced you have sufficient income to cover your monthly mortgage payments. To confirm your income, two bank statements and your two latest pay stubs are needed. Profit and loss statements, balance sheets, and individual and commercial tax filings are needed for self-employed individuals.

Your underwriter will also confirm your job situation with your employer and confirm that your income equals the income you declare.

Appraisals for underwriting mortgage

When buying a house, appraisals are required. They safeguard both you and your lender, ensuring you only borrow the amount that the house is genuinely worth.

To assess the condition and attributes of the home, an appraiser will examine the site. The appraiser looks for residences that are comparable in area, size, and features. However, the residences used for comparing should have been sold within the last six months and be within a mile of the property.

The underwriter analyses the assessment of the amount of your mortgage after a professional appraiser assigns a value to the property. Your application may be suspended if the home is worth less than the mortgage. You have three options in this situation: challenge the appraisal, renegotiate with the seller to reduce the total cost, or step away from the property.

Credit when analysing underwriting mortgage

Your credit score is also assessed by an underwriter. Credit score is a three-digit number that determines how reliable you as a borrower. A strong credit score shows you are a responsible borrower.

The credit score needed varies depending kind of loan you are applying for. If you apply for a conventional mortgage, your credit score must be at least 620.

Many lenders provide underwriting mortgage in today’s market. IDFC FIRST Bank is one of them. The home loan EMI calculator on the IDFC FIRST Bank website can help you calculate how much you need every month for your monthly instalment. Once you know that, you can apply for a home loan from IDFC FIRST Bank. With low interest and a digital process, IDFC FIRST Bank is the preferred choices for many borrowers.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision