After you’ve contracted on a home, made a loan application and are working through all of the contingencies, the last step in the home buying process is Underwriting. What is underwriting? Let me explain with some definitions I’ve collected over the years:
- Underwriting is the process a lender uses to determine if the risk of offering a mortgage to a specific borrower under certain guidelines is acceptable.
- Most of the risks considered by the underwriter fall into 3 categories:
- Credit – not only your credit score, but your credit history
- Capacity – How much you are able to borrow responsibly
- Collateral – The merit of the home you’re buying
- Many mortgage lenders have made underwriting guidelines that reduce the threat of a future buyback, in case of a default. The result today is that much more is required of a buyer in the way of documentation…what many would call “over-documentation”.
- Don’t be surprised or take it personally when your lender calls for more documentation during the process.
- Each page of information is a potential problem ruled out in the eyes of the underwriter.
- Think of the lender as the person who “packages” your application to present you in your best possible light, and
- Think of the underwriter as the person who inspects the package to make sure you fit all of the guidelines as the perfect loan candidate.
- Finally, don’t get impatient, but Remember the Golden Rule of lending – “He who has the gold makes the rules.”
The underwriting process is usually the last step in the home buying process, once all documentation has been collected, all contingencies have been met, and the appraisal has been done.
The MOST important thing for a buyer to remember: Get your paperwork to your lender as soon as you can. Be quick and thorough with your documents and you will save everyone a lot of drama!
Once the underwriter proclaims “clear to close”, the magic words, we all go to settlement.
Contact us for our list of preferred Maryland Lenders.