Mortgage Underwriting Overview
During the underwriting phase, the lender typically looks at several key factors, including:
Credit score: Lenders use credit scores to determine the borrower's creditworthiness and risk of default. A high credit score indicates that the borrower is more likely to repay the loan on time, while a low credit score indicates a higher risk of default.
Income and employment history: Lenders will review the borrower's income and employment history to ensure that they have a stable source of income and the ability to repay the loan.
Debt-to-income ratio: Lenders also look at the borrower's debt-to-income ratio, which compares their monthly debt payments to their monthly income. A lower debt-to-income ratio indicates a lower risk of default.
Assets: Lenders may also review the borrower's assets, such as savings accounts, stocks, and other investments, to ensure they have enough reserves to cover mortgage payments in case of a financial emergency.
Property appraisal: The lender may also require an appraisal to determine the value of the property and ensure that it is sufficient collateral for the loan.
Based on these factors, the underwriter will either approve or deny the loan application. If approved, the underwriter will also specify the terms of the loan, including the interest rate, loan amount, and repayment period.