After documentation of paperwork and after home buyers makes an offer for a home, lenders, banks and other financial institutions are always puzzled with the underwriting process? How long does it take and how it is done? This article aims at the importance of mortgage underwriting and how underwriters determine the creditworthiness and the payment capability of a particular loan requestee. Banks, lenders, and other financial institutions are currently incorporating automated software for analyzing a person’s repayment capability with a comprehensive study of their incomes, debts, credit score, etc. to accurately analyze the repayment capability of the loan applicant. As per the reports submitted by Investopedia, states that mortgage rates in the US are roughly growing at a rate of roughly 3.5% to 3.7% annually and are expected to touch 4.21% in preceding years. Even though automation has cut down the time required for processing, and adherence towards stringent measures transparency of this process is always questioned. Fraudulent applications have increased their financial risk but an efficient mortgage underwriting process will decide the risks associated while accepting or rejecting a loan application.
Following are the elements to consider while Mortgage Underwriting:
- Credit Score
An accurate illustration of a borrower’s debt burden and payment history, without any revealing of their income, net worth, or cash reserves is termed as Credit Score.
The capacity of a loan requestee will reveal their consistency of employment, income, assets, and liabilities. This information will be validated with paperwork such as pay stubs, tax returns, bank statements, or investment statements. Any liabilities that could hinder a mortgage approval such as debts and financial responsibilities will be disclosed.
- Collateral Risk
This confirms the value of homes that make sure the loan amount is backed up with sufficient value in case of default. Appraisal support will assign the property value and confirms the arbitrary value, absence of liens, judgments, and pending taxes on the property.
- Manual Underwriting Home Loan Benefits
Automated underwriting is much preferred among lenders as it would deliver perfect results of approval and denial of loans. Also, the computerized mortgage underwriting process will not fit all loan requestees. Thus even in today’s digital world, manual processing by a human underwriter is considered to be ideal. Manual underwriting will have a comprehensive understanding of a borrower’s credit history and thus get an overall financial picture.
Following Six Ways by which Mortgage Underwriting support Loan Processing:
1. Accurate calculation of Bad credit:
The history of all late payments, collections, bankruptcies, and foreclosures of loan requestees can be termed as bad credit. This will be subjected to as an element that lowers credit scores and generates loan rejections. A proactive underwriter who is willing to help a borrower will clean up their credit reports. So it will be advisable for lenders to outsource reliable and transparent underwriting support.
2. Accurate calculation of Weak credit:
All elements used for identifying the bad credit of a loan requestee will also evaluate their credit profile. Homebuyers should have a minimum credit score to be eligible for qualifying themselves for a loan. A manually underwritten mortgage will also verify their net worth, which can offset thin credit.
3. Identification of No credit:
Loan requestees who have no credit will also be considered as the ones with bad credit. A blank credit report will not prove the creditworthiness of a loan requestee but manual underwriting will consider all factors that are not included in the credit report such as net worth that can decide declining/acceptance status.
4. Efficient measurement of DTI:
The debt to income ratio of a requestee outlines his/her monthly gross income and his total monthly debt. Depending on loan type and other factors, the requirement of DTI varies but when a borrower’s DTI is outside the parameters for a specific mortgage only an efficient & reliable manual underwriting reviewing will decide the approval status of a mortgage loan.
5. Identification of Employment status:
The employment status of the borrower is a critical factor to consider for qualifying a mortgage. Self-employed borrowers will be considered with risk as their incomes vary with seasonal fluctuations and other variables. Also, their business expenses will cause erratic adjustments to their final incomes.
6. Efficient fraud reviewing:
A reliable mortgage underwriting support will eliminate fraudulent loan applications. This involves comparison with all guidelines and following all measures that can review incorrect data submission or omission of certain information from loan application forms. Incorporating result-oriented fraud detection methods, underwriters will identify fraudulent factors in loan applications. They will check for incorrect home addresses, AVM complications, cash transactions in all respected bank accounts, deposits or withdrawals, and other possibly falsified details.
With offerings that don’t let down the process of residential mortgaging, OURS GLOBAL’s Mortgage underwriting Support has worked in parallel with clients of varied sizes and overhead costs has been able to ensure the security of the loans without any kind of hassle. With end-to-end accurate assessments of loan applications and loan pricing analysis, our mortgage experts enabled quicker loan processing and disbursement.