One of the most important people in the mortgage process is the underwriter. This person decides whether you are financially able to handle the responsibility of a monthly mortgage payment. You will never meet this person. And, even if you don't like what the underwriter says about your finances, you won't be able to switch to a new one.
When you apply for a mortgage loan, you'll work closely with a loan officer. These officers are like salespeople. Their job is to get you to apply with the mortgage companies for which they work. But once you turn in your loan application and supporting paperwork, your file goes to a mortgage underwriter. This person reviews your application and financial information to determine how likely you are to default on your mortgage payments.
You have no say over which of your lender's underwriters gets your file. You also can't request a new underwriter. The only way to switch to a different underwriter is to cancel your loan application and either apply again to the same lender -- hoping to land with a new underwriter -- or to seek a mortgage loan with a different lender.
The Underwriting Process
When applying for a mortgage, you must provide your loan officer with copies of such important financial documents as your last two paycheck stubs, last two years' worth of income tax returns, last two months of savings and checking account statements and, perhaps, your most recent credit card bills and retirement accounts. The underwriter studies these documents to determine whether you can afford the estimated mortgage payments, and then recommends either approval or denial of your application.
What They Consider
Underwriters consider several factors when studying your loan application file. They look at your three-digit credit score, which indicates how well you've managed your finances. Borrowers who have missed payments, paid bills late or run up high amounts of credit card debt will have lower credit scores. Most lenders consider a credit score of 740 or higher on the FICO scale to be excellent. Underwriters also look at the relationship between your monthly debts and gross monthly income. Most lenders want your estimated mortgage payment -- including principal, interest and taxes -- to be no more than 28 percent of your gross monthly income. They want your total monthly debts -- including your new estimated mortgage payments and other recurring debts, such as minimum credit card payments and auto loan payments -- to equal no more than 36 percent of your gross monthly income.
If You Are Denied
If the lender denies your mortgage request, you can either immediately apply for a loan with another lender or take steps to improve your finances and then reapply with the same lender. You can improve your credit score by paying your bills on time and paying down your credit card debt. You can improve your debt-to-income ratios by boosting your monthly income, paying down your debts or both.
Don Rafner has been writing professionally since 1992, with work published in "The Washington Post," "Chicago Tribune," "Phoenix Magazine" and several trade magazines. He is also the managing editor of "Midwest Real Estate News." He specializes in writing about mortgage lending, personal finance, business and real-estate topics. He holds a Bachelor of Arts in journalism from the University of Illinois.