What is an underwriter when buying a house?

When it comes to applying for a mortgage, there are lots of processes to go through, some of which you may never have even heard of. One of these that we're often asked about is underwriting. We're here to help answer the burning question: what is an underwriter's involvement when buying a house?

What is underwriting?

Underwriting can sound a little scary, but it's actually a straightforward and essential process in your mortgage application. It's essentially your lender verifying the details of your application (income, debt, assets, property details, etc.) so that they can approve your mortgage. When it comes to a purchase that costs hundreds of thousands of pounds, it's beneficial for both you and the lender that an underwriter can cast their expert eye over everything.

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What is an underwriter when buying a house?

An underwriter is a financial expert that specialises in looking closely at your finances. They look to see how much of a risk you are for the lender to give a loan to. As well as minimising the risk for the lender, they are also looking out for you to make sure you don't take on a mortgage that you can't afford. As part of their process, an underwriter will often:

- Look into your credit history, evaluating your credit score and looking at any missed payments, misuse of credit, bankruptcies and other things that may make you a risk to the lender.

- Ask you to provide proof of your income and employment to make sure it matches up with your application.

- Order an appraisal on the house you are hoping to purchase so that the lender's offer correlates to the property value.

- Check your savings to ensure you actually have the money for a deposit. They may also want to make sure that you haven't got the money through fraud or money laundering, so they may ask to see proof of the source of the deposit if all or part of your deposit was gifted to you.

- Work out your debt to income ratio, which is how much you spend vs how much you earn every month. This is to make sure you can comfortably afford your monthly mortgage repayments.

How long does underwriting take?

There is no set time scale for underwriting, but it's not a long process and is often completed within one week. The length of time it takes to get a decision can depend on:

- The complexity of your application

- How many applications they are currently processing

- The experience of your underwriter: a highly experienced underwriter may be able to reach a decision much faster than someone newer to the profession

Underwriting all goes on behind the scenes, so there's not much you can do to speed it up except to keep an eye out for your lender getting in touch if they require any further documents. Having a mortgage broker on hand to help with your application prior to the underwriting stage should help this run smoothly, as they will have double checked everything is present, correct and fully verified.

At what stage of the mortgage application does underwriting take place?

Once you submit your mortgage application to a lender, they have a series of checks to make before deciding whether or not they can lend to you. These processes can be varying from company to company, but they often look a little something like this:

1. They will carry out an initial soft credit check, doing a quick scan for any significant red flags, such as bankruptcy.
2. Next up is score carding, where lenders give you a score based on all the details on your application, such as income, employment and debts. You'll need to meet their minimum score level (which can be quite high) for them to progress further with your application. This usually is when you'll receive your mortgage in principle.
3. Finally, they'll move onto an in-depth look at your finances and carry out valuations on the property you're hoping to buy to make sure it's worth what you're offering to pay. This is the stage at which the underwriting process comes into play.

Can my mortgage be declined in the underwriting process?

An underwriter carries out a complete and thorough evaluation of you, your finances and your mortgage application, so there is a chance that this stage of the process could result in your mortgage getting declined. This is often due to one of two reasons:

1. Your circumstances have changed since you received your mortgage in principle; for example, you have lost your job or had to take a pay cut.
2. They may find something within your finances that makes you an increased risk to the lender. Perhaps you have failed to disclose a regular outgoing payment, or your finances don't match up with your application. Something that's important to note here is that some people, especially young first-time buyers, have even had mortgages declined due to joke payment references when transferring money to friends. It may seem funny at the time, but it's best to cut out the hilarious references if you're hoping to get a mortgage in the foreseeable future, as any inappropriate language or illegal terms could count against you.

Remember, your mortgage, in principle, isn't a guarantee, so it is possible that you won't get the mortgage you initially expected.

What can I do if an underwriter declines my mortgage?

The best thing you can do is ensure that you find out exactly why your mortgage has been declined, which most lenders will explain to you. You'll then need to work on whatever that may be before submitting a new application. You may need to save a bigger deposit, look at ways of increasing your credit score, or make sure that you've paid off some debts so you have a little more spare money to go towards your mortgage repayments.

A declined mortgage will show up on your credit file, so it's definitely best to wait a few months before applying again, as this will be a red flag for any other lenders.

Summary

Underwriting is one of the processes that allows your lender to verify all your details to help them make a final decision on whether or not they can approve your mortgage. It's just one of many steps in the house buying journey, which can all start to feel a little overwhelming, especially as a first-time buyer. Having mortgage experts on hand helps to take some of this stress away and ensures that the process runs smoothly.

Now that we know what an underwriter is when buying a house, Mortgage Mentor is here to help keep the process hassle-free and straightforward.

If you're a first-time buyer that needs a helping hand to guide you through the complex world of mortgages, you're in luck. Coming very soon, Mortgage Mentor is an innovative new mortgage brokerage with free initial advice and zero broker fees. Get in touch to find out how our expert team could help you.

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