Everyone who begins their journey with homeownership knows it isn't always a quick process. Whether you have good credit or problem credit, every potential homeowner or those wishing to refinance must go through the same approval process---this is called underwriting. A mortgage underwriter works in conjunction with a loan officer and funding sources to make sure every loan is a successful union with the client and the bank.
Loan Approval Process
A mortgage underwriter is someone who specializes in making loan decisions for his client which is typically a bank or financial lender. When someone applies for a loan, she gets either denied or approved through a loan officer. The loan officer bases this decision off of the accuracy of the information found on a customer's application and credit report. If approved, the next step is pre-approving the loan in conjunction with a property inspection and appraisal. Before the loan is ready to be finalized, the underwriter cross-checks all of the borrower's financial information, re-examines the statistics of the loan and may require additional information from the borrower before the loan can be approved.
Job Tasks
Mortgage underwriters base their job tasks and duties off of the three C's of underwriting---credit, collateral and capacity. Starting with credit, the underwriter examines the borrower's credit history. The underwriter should be assured that the borrower will repay the loan in a timely manner based off his past payment history. The underwriter also looks at the collateral which in a mortgage loan would be the home. The home should be in good repair and appraise at or above fair market value. The underwriter also looks at how much equity will be placed into the home with the down payment made by the borrower. Capacity is also important. This is often referred to as the borrower's debt-to-income ratio. The borrower should have enough money coming in to pay her new mortgage payment along with other bills such as credit cards, personal living expenses and revolving credit accounts.
Types of Loans
Mortgage underwriters generally specialize in certain types of loans. Many loans fall into the conventional category. This is a popular mortgage ranging between 15 and 30 years and most have fair market interest rates. They lend to people with good to exceptional credit who have at least 10 to 30% of cash funds to place as a down payment on the home. Balloon or adjustable rate mortgages are considered high risk because of the adjustable rate and borrowers often have less than perfect credit. These loans are carefully analyzed before approval. Government-backed loans such as USDA, VA and FHA loans are generally geared toward first-time home buyers. These loans have to be carefully analyzed in conjunction with government guidelines that are already set in place.
Experience
Each employer requires different requirements for their underwriters. A background in financial development and loan servicing is generally required. Previous experience as a loan officer or mortgage broker is beneficial. Most underwriters may have to take a course to become certified in FHA or HUD in order to process government-backed loans.
Job Environment
Mortgage underwriters work in an office setting and must have access to company files, real estate databases and the Internet. They make phone calls to validate data on loan applications. Most mortgage underwriters work in-house at a bank or financial institution. They often time work in collaboration with other underwriters to make a final loan decision. Some underwriters work independently and set their own hours working at home or on a per diem basis.
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