Marva Morris: Hey! Hello everyone. Thanks for joining us again. I am Marva Morris, your New Jersey Realtor, and joining me today is Matt Fischman.
Matthew Fischman: Marva, thanks for the introduction. My name is Matt Fishman and I have been a mortgage loan officer for the last 16 years. I’m with Barrett Financial Group and I’m looking forward to giving you some helpful tips to become a homeowner today.
Marva Morris: Excellent! We’re looking forward to it too.
Matthew Fischman: So today we’re going to be talking about mortgage underwriting. If you’ve ever been involved in the home buying process you have probably heard of this thing called underwriting. It’s this whole, you know, scary term that get’s thrown around in the mortgage world. And we don’t all know what exactly it means. So that’s a great question. It’s not something that comes up in everyday life.
So what underwriting is, is it’s basically a process that the mortgage company takes you through to get you formally approved for a mortgage. So you would likely have already been pre-qualified, or hopefully pre-approved, before you found a house and your offer is accepted. Now you have to go back to the mortgage company so they can fully approve you.
So they’re going to do a formal review of your credit, your income and your assets and they’re also going to verify that information. The person that’s the underwriter is going to review your whole credit report top to bottom. They’re going to be looking at your payment history, they’re going to be looking at your overall debt load and they’re going to be looking to see if other institutions have checked your credit recently. Things of that nature.
Now there are distinct guidelines that the underwriter has to follow and these come from institutions like Fannie Mae, Freddie Mac and the Federal housing Administration (FHA), if you’ve ever heard of those. So the underwriter can’t just willy-nilly do whatever they want. They have certain policies and procedures that they have to implement but it is a human being that’s that’s reviewing your information at the end of the day.
In addition to your credit report, they’re going to review your employment history and your income so they’re mostly looking for stability. In other words not a ton of job changes or big fluctuations in income. They’re also going to want to look into the future and see that there’s a strong likelihood that your income is going to continue into the future based on your employment history over the last two years. There’s also a verification process that’s done so in other words there are some fraud prevention components of underwriting. For example they will check that the pay stubs you provided are legitimate. A phone call is going to be placed or an email is going to be sent to your employer to make sure you really work at this place of employment. That type of thing – so everything is validated.
And then kind of same with the assets – we want to know where the down payment and the closing costs are coming from. We want to make sure that those are your own funds and that you, let’s say, didn’t take a credit card advance out and borrow extra money to to make your down payment. So we we look at your bank statements and we look at any deposits that are going in there and we may or may not also contact your bank just to make sure the statements that were provided to the mortgage company are the actual statements that were generated by your bank.
So you have this whole top to bottom review. When it’s all said and done ultimately you’re issued what’s called a “clear to close”. That means the underwriter has completed their review. You’ve supplied all the documentation that you need to and everything checks out. You’ve essentially checked all the items off the mortgage underwriting checklist. Then the underwriter puts their proverbial rubber stamp of approval on your mortgage application and then that means that we’re going to release the mortgage money to you. In other words you’re fully approved for your mortgage and you can go to closing and become a homeowner. So that’s what underwriting is in a nutshell.
Marva Morris: Thanks so much for solving that mysterious mortgage underwriting question. So just know that whenever you’re applying for a loan, you’re gonna have to go through underwriting. And they are a totally separate entity from anything else, so they don’t know you. They don’t know your background, they don’t know that you’re this great person and they just want to make sure on paper everything that you said is true. They’re going to vet you out and tell the mortgage company this person is worth the risk. So that’s my layman’s terms of what mortgage underwriting is.
Matthew Fischman: Great explanation! I couldn’t have said it better myself.
Marva Morris: Thank you for joining me! I hope you have a great day!
Matthew Fischman: Everyone, again this is Matt Fishman with Barrett Financial Group and I hope you found today’s information about underwriting verry helpful. Take care.
Marva Morris: Excellent! This is Marva Morris your New Jersey Realtor. Moving you forward and hoping you have an awesome day!