The Ultimate Underwriting Guide

April 30, 2021

The Ultimate Underwriting Guide

When you apply for a personal loan or mortgage, the lender must assess the information provided to determine your eligibility. This process can solidify or hurt your chances of getting a loan. The underwriter has to collect as much information as possible about your financial situation to do this effectively. By the end of this article, you will know what happens during underwriting so that you can avoid mistakes.

What Is Underwriting in Loans?

Underwriting refers to the process used by lenders to assess a borrower’s ability to pay back a loan. The underwriter evaluates your assets, credit score, and income. It is an exhaustive process that can take anywhere from days to a couple of weeks. Here is a breakdown of the underwriting process:

  • Income Verification – The underwriter first checks to see if you reported your actual income by verifying with your employer. The information about your income is then used to determine if you can afford the monthly payments.
  • Appraisal – An appraisal is an order when you are applying for a home loan. It is done to determine if the property is worth the amount you are going to pay.
  • Credit Score – Your credit score indicates how responsible you are at repaying loans. For conventional loans, you will need a score of 620. However, you get by with a 580 credit score if you are applying for an FHA loan. The credit score is also used to calculate the debt-to-income ratio.
  • Asset Verification – There is always a risk that you may not be able to repay the loan on time. In such situations, your assets act as collateral. Underwriters look at your bank accounts, stocks, or any other personal property.

How to Use Underwriting to Your Advantage?

Depending on the findings of the underwriting process, the lender can choose to approve, deny, or suspend your loan applications. The following are things you can do to increase your chances of getting approval.

Providing Information Promptly

Although the underwriter does all the work, your input will be crucial. You will need to provide documentation about your income, assets, loans, and credit history. Delaying and not providing this information only drags the process. We recommend having all these documents prepared beforehand.

Be Honest About Your Finances

Underwriters are trained professionals with an eye for detail. Financial institutions rely on their risk assessments to make decisions. Although it might be tempting to lie about your information to get a loan, nothing slips past the professionals. For instance, income information is usually confirmed with the employer. Be honest, and provide explanations wherever the records are unclear.

Maintain Your Employment

Don’t make any big career decisions during the underwriting process. According to the Federal Reserve, the overall loan delinquency rate stands at 1.92%. Lenders are reluctant to give money to people they suspect won’t repay. Quitting your job or changing careers is not a good idea during this period. It would be best to refrain from taking new credit lines or making big purchases until the process is complete.

Bottom Line

We hope this article provides insight into what goes on during underwriting. If you follow the tips discussed, you won’t have any problems getting your loans approved.

Get Evolved.

Please do not send sensitive personal information, financial or otherwise, through an unsecured forum.

Contact Us

866.395.2754

Evolve Bank & Trust

Entering Third Party Site

By accessing this link you will be leaving Evolve Bank & Trust's website and entering a website hosted by another party. Please be advised that you will no longer be subject to, or under the protection of, the privacy and security policies of Evolve Bank & Trust's website. We encourage you to read and evaluate the privacy and security policies of the site you are entering, which may be different than those of Evolve Bank & Trust.

Login to your account.

Choose your account type

Need help finding something?