Mortgage underwriting is the process lenders go through to verify a buyer’s financial information, credit history and the property details. If everything looks above board and meets the lender’s requirements, the mortgage underwriter can give the loan a stamp of approval. Whether you’re buying or refinancing, mortgage underwriting is a pivotal part of the process.

A mortgage underwriter’s role is to assess risk based on whatever criteria is set by the lender. The underwriter will peek into every nook and cranny of your finances to assess your risk as a borrower. They also assess the risk involved with the property, making sure it’s worth enough to cover the loan should you fall behind on payments.

The process of underwriting can be one of the most time-consuming steps of the mortgage journey, lasting anywhere from a few days to several weeks. Delays from missing documents, unfinished signatures and issues from appraisals or title insurance can push that timeline out further.

Every borrower’s case is different, so it can be tricky to pin down exactly how long it will take. Let’s take a walk in your underwriter’s shoes, step by step.

Even before you find “the one,” you should get preapproved for a loan (not to be confused with the less formal prequalification process). It basically lets the underwriter assess your risk as a borrower without having a specific property to assess—yet.

Taking care of your preapproval early in the home buying process can shave some time off of underwriting overall. When it’s time to underwrite your official mortgage application, you’ll already have the green light as a borrower—the underwriter will just need to assess the property.

Unlocking your budget

A preapproval will give you some handy information early on. You’ll know how much the lender is willing to loan you and at what interest rate. Just remember, preapproval is not a guarantee, but it’s a great way to show sellers you mean business.

After you make an offer on a house, your lender brings in the mortgage underwriter to make sure you can handle the loan you’re signing up for. This is the big moment when every signature and sheet of paper is put under the microscope.

Employment and income verification

Underwriters will check your employment, often by calling your employer to make sure you still work there. You’ll also need to show some documentation to prove your income is legit. Lenders want to know you have a steady paycheck and can afford to pay them back. If you’re self-employed, you’ll need evidence of stable work and earnings.

Here’s what they’ll want to see:

• W-2s from the past two years, or 2 years of tax returns if you’re self-employed
• Two most recent bank statements
• Two most recent pay stubs
• Proof of additional income like pension, social security, alimony and dividends

Credit history and score

Yes, it’s time for another credit pull. The lender wants to ensure your financial situation hasn’t changed since the preapproval stage. That’s why it’s so important to be on your best financial behavior during the mortgage process. A missed payment here and a new line of credit there could bring down your credit score.

Debt-to-income ratio

Even if your income looks great on paper, lenders need to confirm that you aren’t overloaded with debt. That’s when they calculate your debt-to-income ratio (DTI): the relationship between how much you earn each month and how much you owe in monthly debts.

Your lender will need a list of your monthly debt payment that spells out:

• Creditor’s name and address
• Account numbers
• Loan balances
• Minimum payment amounts

Asset verification

You must have enough saved to cover the down payment and closing costs. The underwriter needs to see that you have assets for the down payment and for closing costs, funds must be verified if the borrower is bringing cash to closing.

Be ready to show proof of assets like:

• Checking and savings accounts
• Real estate properties
• Retirement savings
• Personal property

After the underwriter takes a look at your stats, their focus shifts to the home in question. They’ll order an appraisal to determine the fair market value of the home based on the size, location, condition and property features.

Your lender wants to be sure you aren’t borrowing more than the home is worth. On the off chance you default on your loan, they need to be able to recoup the costs.

If your home’s worth is below the asking price, your lender can ask you to bring more money to closing, negotiate the price with the seller or even turn you away. That’s where your appraisal contingency comes in—protecting your deposit if you have to back out.

The underwriter needs to rule out any legal troubles tied to the property’s ownership. A title company will run a title search to verify the seller’s right to sell and ensure there are no skeletons in the closet like liens, easements, zoning issues, unpaid taxes or restrictive covenants.

After the all-clear, the title insurer provides title insurance, which protects the lender just in case any ownership conflicts bubble up after closing. It can be smart to get owner’s title insurance as well to protect yourself in the event of a title dispute. Your lender will also expect you to secure homeowners insurance at this time, protecting the property and your belongings from damage. Each of these types of insurance will be lumped into your closing costs.

The leg work is done, and the big moment has arrived—drumroll, please! Let’s dig into how things can turn out after the process of underwriting and what your next steps might be.

Approval

What is underwriter approval? It means you can dust off the welcome mat and round the corner towards the closing! You’ll receive a closing disclosure that takes you through every nickel and dime of your loan, from the interest rate to monthly payments and fees.

Conditional approval

This means your loan is approved except for one or two missing pieces. It might be as simple as a missing document or a question about your tax returns. As long you can fill in the blanks, you’ll be good to close.

Suspension

If you get this yellow light, it means some holes in your application are keeping your underwriter from making an informed call. Maybe they can’t verify your employment or don’t have enough information about your income. Either way, it’s time to reach out to your lender and find out what they need to keep things moving.

Denial

If you get denied, it means you have too many red flags for the lender’s comfort at this moment. A denial can be discouraging, but you’ll need to find out what happened before planning your next move. A loan is usually denied because the buyer doesn’t meet the requirements, has too much debt or has a low credit score. Keep your chin up and set up an improvement plan before you reapply.

If the waiting game is getting long, plenty of factors could be throwing your underwriter curveballs.

Automated vs. manual underwriting

In the home loan underwriting world, your application can be examined by computers and by people. Most mortgage lenders use software that zips through your application and quickly determines whether you meet the requirements.

However, if you don’t have a cookie-cutter background, your application may call for manual underwriting—code for “real person.” An underwriting expert can take a more nuanced look at your finances, but this will take some time. Many lenders use a mix of automated and manual underwriting.

Your lender

Lenders won’t always use the same approach. Some take care of underwriting in-house while others dip into outside sources for help. It can also differ between financial institutions and whether you’re going through a bank or a mortgage broker.

Your loan type

Not all loans are created equally. USDA, FHA and VA loans require heavy lifting from the underwriter, wading through more stacks of paperwork and eligibility requirements. When you have a conventional loan, there are fewer hoops for the underwriter to jump through.

Application volume

Whether you’re idling on the highway or in line at the deli counter, traffic jams are a reality of life. If there are many applications ahead of you in the queue, yours might have to wait before it hits the underwriter’s desk.

Your circumstances

Of course, your individuality factors into the equation. If the underwriter has to do some detective work into your credit history or track down missing paperwork, you can expect delays. Don’t worry—this is normal. Patience is your friend here. Just make sure you’re touching base with your lender to answer any questions.

Some parts of the mortgage underwriting process are out of your control, but you can certainly pave the way for smooth sailing. The secret? Become your underwriter’s favorite applicant by making their job easy. When you’re organized, upfront and available for questions, you can trim some fat from the underwriting timeline. Here’s how.

Submit accurate information

The devil is truly in the details at this stage of the game. Make sure you give your lender every piece of information they ask for and double check that it’s dated within the required timeframe, from bank statements to pay stubs to tax returns. Be honest and upfront about any financial hiccups, as your credit report will tell the whole truth. Incomplete information or oversights can seriously delay the process.

Stay on top of your finances

At several checkpoints in the mortgage journey, you’ll have eyes poring over your finances. From the time you apply through the day you close, make sure you’re putting your best fiscal foot forward. Maintain a healthy credit score and income stream by avoiding:

• Applying for other loans or credit
• Adding new debt to your plate
• Making a big purchase
• Changing or quitting your job

Respond to lender requests quickly

Keep those lines of communication open! This is a very involved process, and your underwriter will probably have questions along the way. They might need to ask you about a line item on your bank statement or maybe a missed payment. Either way, the quicker you respond, the quicker you can resolve the issue and head toward closing.