Lenders take many steps when evaluating loan applications because they know that an underwriting department must clear the file before issuing the loan. If you want to get a mortgage loan, you may want to learn more about this process before you rush to a lender. Your lender is the one that issues the loan, but they cannot issue it without the underwriter's approval. What is underwriting? Why do lenders use it? If you have questions about underwriting, here are several vital things you should know as you prepare to get a mortgage loan.
Underwriting is a Third-Party Company
The first thing to know is that underwriters do not always work for mortgage lending companies. They are typically third-party organizations that provide a service to mortgage lenders. Mortgage lenders hire underwriters to examine their mortgage applications because they are required to hire them. Mortgage lenders cannot issue loans without the cases going to underwriters first.
What Underwriters Do
When the underwriting department receives a loan application case, they must verify all the information on the loan application to ensure that it meets the standards of loan programs. For example, if a person is using a loan program that requires a credit score of 680, the underwriters will check the person's credit to make sure it is at least 680. They also verify a person's income and debts. Next, they move on to the evaluations that relate to the house the person is buying. They will ensure that the house is worth enough money for the lender to approve the loan.
The Purposes of Underwriting
Underwriting is an essential part of the mortgage industry, as this department serves several key purposes. The first purpose is to protect the lenders involved with the loan. Underwriting stops lenders from issuing loans when there is too much risk involved. Secondly, the underwriters protect borrowers by stopping them from getting loans when they are not in the financial position to qualify. Underwriting may seem like an intimidating process to borrowers, but it is a crucial step in getting a loan. If everything checks out, the underwriters will approve your loan, and you will have no trouble closing on it.
You cannot get a mortgage loan without an underwriting department approving it. Therefore, it is vital to understand how this works when you apply for a loan. You can learn more by contacting a mortgage lender.Share