Underwriting: What to expect
Your loan is in now in the hands of a mortgage underwriter who will evaluate your credit history, income, and assets in order to make a final decision on your loan request.
The underwriter considers the “three C’s of underwriting,” otherwise known as credit reputation, capacity and collateral.
- Credit reputation, based on your credit history, helps an underwriter measure your willingness to repay debts based upon how well you have paid them in the past.
- Capacity is your ability to repay a loan and accounts for factors such as how much debt you have compared to your income, current and past employment history, and how much money you have available for unexpected future expenses.
- Collateral accounts for the property type, use, and how much you are asking to borrow compared to the value of the home. Property type describes the type of property, such as whether the home is a condo, attached or detached single family residence, farm house etc. Property use refers to whether the home will be your primary residence or used for rental income.
The underwriter will evaluate all of these factors when granting final approval for your loan. Occasionally, you will be asked to provide additional documentation or clarification pertaining to your application. This process can be nerve-wracking, with so much at stake in your real estate transaction, but it represents the final step in obtaining your mortgage. Be patient, and respond to any requests in a timely fashion in order to keep your transaction and timeline on track.