How to get approved for a mortgage: What do underwriters look for?

What do mortgage underwriters look for when they review your loan application?

They consider four elements: income, assets, credit, and the collateral (the property you are financing).

Which of these four is the most important?

It depends on the program you’re applying for. Some programs, like a hard money loan, just looks at the collateral. But for a conforming conventional loan, underwriters consider all four aspects of your application.

What do underwriters look for when they review your income?

They look for stable recurring income you can use to pay your mortgage and all other bills.

What if I get bonus or commission? Can they include that in your income to qualify?

Yes if you have a history of receiving such income. Usually they need to see at least two years of bonus or commission income.

What do underwriters look for when they review your credit?

Typically, underwriters want to see three active trade lines (accounts) that have been open for at least 12 months. Thin credit (less than three trade lines) is often harder to overcome than having multiple accounts with some late payments . However, there are many programs available for borrowers with thin credit or derogatory credit.

What do underwriters look for when they review your assets?

Underwriters look for a couple of things when they review your bank statements. They want to see you have enough money to purchase a home and pay for closing costs. They also want to see “reserves”.

What are reserves?

Reserves are the money you have left over after closing. Underwriters want to make sure you will have at least a few or more months of mortgage payments left in your bank account. Conforming conventional programs usually require anything from no reserves to 6 month’s mortgage payment. Some non-QM programs and jumbo programs require more in reserves.

Underwriters will also look for large deposits. A large deposit is defined as any amount greater than a paycheck.

Why do underwriters question large deposits?

Underwriters want to make sure that a large deposit is not the result of borrowing from an entity at high interest rates because that could affect your ability to pay your mortgage on time.

What else do underwriters look for when they review your assets?

They look through your statements to see if there are any payments made every month that were not disclosed on your loan application. For example, if they see the exact same amount coming out of your checking account every month, they will think you might have a debt they need to take into account when qualifying you for a mortgage.

What do underwriters look for when they review the collateral?

When an underwriter receives the appraisal report on the property you are financing, they review it to make sure the comps (comparable sales) are within six months and within a mile of the subject property. If the comps don’t meet those two criteria, the appraiser should address the reasons why in their comments in the addendum.

Any questions about how to qualify for a mortgage? Then call the experts at Amerifund Home Mortgage at (888) 650-7316.