What Does It Mean When a Mortgage File “Moves to Underwriting”?

You’ve applied for a mortgage loan, gotten preapproved, and even had your offer accepted on a house — no easy feat in today’s market. Now you’re entering the underwriting stage and you’re well on your way to homeownership.

But you may be wondering: What does underwriting mean?

Underwriting is the meat of the loan application process. It’s when your lender analyzes your finances and the loan terms to ensure they can move forward with your mortgage.

As a borrower, it helps to understand what happens when a mortgage moves to underwriting, how long the process will take, and how you can keep your loan moving along.

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What's in this Article?

What does underwriting mean?

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What’s the role of a mortgage underwriter?

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Manual versus automated underwriting

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How long does underwriting take?

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When does underwriting happen?

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What does underwriting mean?

Underwriting is the process involved with getting final approval for your mortgage loan. When your mortgage file “moves to underwriting,” your lender will verify your income, assets, debts, and property details.

“Typically, after your home has been professionally appraised and the appraiser completes his or her report, your mortgage application is sent to underwriting,” said Imani Francies, an Atlanta-based mortgage expert with Clearsurance.com. “Your mortgage lender’s underwriter will review the loan file to ensure that all essential documents are included and sufficient enough for loan approval.”

Although you likely provided tax returns, pay stubs, and other documents during the preapproval, your lender’s underwriting department may ask for additional documents at this point. Expect to provide bank statements showing you have sufficient funds to cover your down payment and closing costs, as well as tax return transcripts.

The underwriter will also need documents concerning the property as well. They’ll verify that there are no other liens or outstanding claims on the property, and they’ll compare the loan amount to the home’s appraisal value as well.

What’s the role of a mortgage underwriter?

A mortgage underwriter is a financial specialist who works for your mortgage lender. They investigate your financial situation and decide how much risk a lender will assume if you are approved for a mortgage loan. The underwriter is responsible for determining how qualified a borrower you are and your ability to repay your mortgage.

“Underwriters assess several variables while evaluating your application, including your credit history, income, and any outstanding obligations,” Francies said.

A mortgage underwriter may request a number of documents to analyze your borrowing ability, including:

  1. Driver’s license or another photo ID

  2. 30 days’ worth of pay stubs

  3. W-2 forms or I-9 forms from the previous two years

  4. Federal income tax returns from the past two years

  5. Bank statements or verification of other assets from the last few months

  6. Documentation of any other sources of income

  7. Information on long-term debts, such as educational loans or auto loans

  8. Information about a real estate property/acknowledged purchase offer (signed by all parties)

What underwriters look for

Underwriters cannot discriminate against home loan applicants based on their gender, religion, marital status, sexual orientation, family status, any disabilities, or whether they receive government assistance.

But they can deny borrowers for loans if they have insufficient income to cover their monthly payment and other monthly debts or if they have a high debt-to-income ratio or low credit score.

Underwriters must also abide by the guidelines of whichever type of loan you’re using.

“Lenders have certain qualifications they must meet to sell off their loans to Fannie Mae and Freddie Mac. But some lenders keep their loans in-house, like local banks, which can have different requirements than lenders seeking to sell off their loans,” explained Elizabeth Boese, a Realtor® with Coldwell Banker Realty in Boulder, Colorado.

If you are using a government loan program, the underwriter will need to follow those guidelines. For instance, FHA and VA loans have certain appraisal requirements that a property must conform to. An underwriter cannot approve a loan without an appraisal report from an FHA- or VA-approved appraiser.

Manual versus automated underwriting

There are two types of underwriting: automated and manual. Most lenders use automated underwriting, whereby a computer algorithm parses your information and uses it to determine if you meet the lender’s standards and loan program qualifications. Human beings are still involved in this process, but a computer does much of the work.

Automated underwriting is the preferred method, and the vast majority of loans today are approved by this computerized process.

“Often, automatic underwriting is used for loan preapprovals, while manual underwriting is used for final underwriting at the end of the mortgage process.” Imani Francies

But when there’s a situation the computer can’t approve, a human can review the file. Manual underwriting means that one or more individuals examine your financial details instead of a computer. This process may be needed if you have thin credit history, a high debt-to-income ratio, financial difficulties in your past, or you have other unique circumstances. An underwriter might request more documentation to verify your finances or employment before making a decision on the loan.

And both forms can come into play on any file.

“Often, automatic underwriting is used for loan preapprovals, while manual underwriting is used for final underwriting at the end of the mortgage process,” Francies said.

How long does the underwriting process take?

Underwriting a mortgage can take anywhere from a few days to several weeks, depending on your financial circumstances and the lender’s resources. Initial underwriting approval typically happens within 72 hours of submitting your complete loan file, although the entire process could take up to one month in worst-case scenarios.

“Remember that your loan is also contingent upon the appraisal, which itself can take three weeks to get scheduled,” Boese says.

To speed up the underwriting process, have all your necessary documents and requested information ready for the lender when they ask for it. Also, be prepared to respond punctually to any phone calls or requests you get from the lender after submitting your loan application.

Related: How To Buy a House in 11 Steps

When does underwriting happen in the mortgage process?

Underwriting happens at two stages in the mortgage process. The first is when you apply for preapproval. Your loan officer will collect information, such as your Social Security Number, current address, employment information, bank statements from the past two months, tax returns, and pay stubs.

They’ll also pull your credit to check your credit score, your payment history, and your debt-to-income ratio. Using that information, they’ll calculate how much you can borrow. Before they can issue a preapproval letter, however, they’ll send all of this information to underwriting.

The underwriting team will analyze your documents and if everything checks out, they’ll issue a conditional approval.

The approval is conditional because you don’t have a sale contract yet and the loan has not been processed.

After you find a home and get your offer accepted, your loan application will be processed — and it will go back to underwriting.

At that point, an underwriter might ask for updated pay stubs and bank statements, especially if it’s been a few months since you were preapproved.

“You can improve your chances of getting approved more quickly by having everything ready and in one place, being honest when filling out your application, responding quickly to requests for extra information, and being prepared to explain unfavorable items on your credit report,” Imani Francies

The four possible underwriting outcomes:

  1. Approved. This means the lender has evaluated your credit, verified your documentation, authorized a specified loan amount, and decided to give you a loan

  2. Approved with conditions. This means the underwriter is generally satisfied with your application but that certain conditions must be satisfied to get a final approval. “Often, the underwriter will indicate that your loan is conditionally approved based on the appraisal,” says Boese. “If your home doesn’t appraise for the sales price, the loan will only be based on the appraised value.”

  3. Suspended. This means the loan is on hold and not allowed to proceed until clarification or additional supporting paperwork is provided, as requested by the lender

  4. Denied. This means the lender has rejected your mortgage application, either because of your finances or because they will not lend on the property. Borrowers who are creditworthy can still be denied if there are serious issues with the home, such as safety or environment hazards

When the underwriter has verified all of your information — and they’ve gotten the appraisal report and title search back — they’ll issue your “clear to close,” which means the loan has been approved. You’ll receive your closing disclosures with all the costs and details on the loan at least three days prior to your closing date.

Underwriting FAQs

What does it mean when a loan is in underwriting?

A loan in underwriting means that an underwriter is evaluating your income, assets, debts, and other financial details, as well as property information. The lender’s underwriter will need to determine whether you can afford the monthly payments on the loan, whether you are creditworthy, and whether the house can be approved for your loan program.

How long does it take for the underwriter to make a decision?

The underwriting process can take days to weeks, depending on a number of factors, such as the complexity of your financial situation,  and how long it takes to receive the appraisal report and title search results, and even how busy the lender is.

Why would an underwriter deny a loan?

An underwriter may deny a loan if the borrower doesn’t meet their credit and income guidelines, lacks sufficient job stability and/or savings, or has a high debt-to-income ratio. They can also deny a loan if there are other liens on the property or the house is in poor condition or appraises at a value below the list price.

Prepare yourself

Every borrower hopes for a quick mortgage loan approval. But lenders are legally obligated to ensure you have the ability to repay your loan and that the house is able to be loaned on. That’s why the underwriting process is so important.

But you can help the underwriting process along by being prepared.

“You can improve your chances of getting approved more quickly by having everything ready and in one place, being honest when filling out your application, responding quickly to requests for extra information, and being prepared to explain unfavorable items on your credit report,” Francies said.

Ready to get preapproved? Start here.


Some references sourced within this article have not been prepared by Fairway and are distributed for educational purposes only. The information is not guaranteed to be accurate and may not entirely represent the opinions of Fairway.

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