Mortgage underwriting is a complex process involving the calculation of income and equity ratios, a review of creditworthiness and payment history, and an analysis of a borrower's likely repayment potential. Underwriters are charged with reviewing facts and data, but they are also called upon to make judgment calls about potential borrowers. During your mortgage loan process, it is a good idea for you and your spouse to sit down with your underwriter and discuss the strengths and weaknesses of your mortgage application. This will establish rapport and help your family obtain the most advantageous home loan possible.
Contact your mortgage loan officer and schedule a meeting for you and your spouse to discuss with him the progress of your mortgage loan application. Take copies of your two most recent pay stubs, Forms W-2 for the past two years, two most recent income tax returns and the past 12 months of joint bank statements to this meeting.
Ask your loan officer to schedule a meeting with the underwriter reviewing your loan application. If you are working with a small bank or credit union, the underwriter likely works in the same office as the loan officer. If you are working with a larger financial institution, ask to schedule a conference call.
Prepare for the meeting with your underwriter. First calculate your debt-to-income ratio (DTI) and disposable income. For DTI, divide the total of your current monthly debt payments (excluding utility bills, but including the monthly payment of the mortgage loan offer) by your gross monthly income. A strong DTI is below 40 percent and a weaker DTI is above 45 percent. For disposable income, subtract your total monthly debt payments from your total monthly net income. Underwriters want to ensure that potential borrowers have a financial cushion after making monthly debt payments.
Calculate your loan-to-value ratio (LTV). To do this, divide the amount of your proposed mortgage loan by the value of your home. If you are purchasing a home, subtract the amount of your down payment. The lower the LTV, the stronger the credit risk you and your spouse represent.
Obtain credit reports from the three major credit reporting agencies -- TransUnion, Experian and Equifax -- for you and your spouse. Review them for negative information, such as late payments. Be prepared to provide a full history and explanation of any negative entry.
Meet with or call the underwriter. Ask the underwriter what poses challenges to your mortgage loan application. For example, if the underwriter is concerned that your family does not have enough disposable income, explain any additional unverified income and provide corroborating bank statements. Speak frankly with the underwriter and attempt to address any concerns she raises. If you cannot provide an answer to a question, make a note of it and provide clarification at a later date.
Conclude the call or meeting with the underwriter and ask if she has additional questions or concerns. Ask her when you might expect the mortgage loan application to be approved and schedule a closing date with your loan officer.
Items you will need
- Two recent pay stubs
- Two most recent Form W-2s
- Two most recent income tax returns
- Past months of bank statements
- Remember to review all loan terms on a final approved application with your loan officer before you enter a closing. These terms must match those reflected on the final closing documents. Do not become hostile in a meeting with an underwriter. Remain professional and honest about your finances.
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