What is Underwriting

Underwriting is a mortgage lender’s process of assessing the risk of lending money to you. The bank, credit union or mortgage lender has to determine whether you are able to pay back the home loan before deciding whether to approve your mortgage application, and does this through underwriting.

The underwriter then documents their assessments and weighs various elements of your loan application as a whole to decide whether the risk level is acceptable.

  • Lender will need about 6 weeks to collect, review, and verify
  • Collect these: former addresses, employers, income, liabilities, assets,

What Lenders typically want from you

  • Will usually want you to have 2 years of employments, record of paying bills, credit report
  • Lower credit score means higher interest rate
  • The higher your credit score the higher the grade of paper you qualify for and the lower amount of interest.

How to shop for a mortgage: Step by Step

  1. Get your documents together- Lenders will need proof of your income, assets, and credit to give you an accurate rate quote. So start compiling the paperwork you’ll need on your application, like bank statements and recent pay stubs
  2. Get Pre-Approved – Find a lender you like and get a preapproval letter. This allows you ot make an offer a seller will accept. (Getting preapproved doesn’t commit you to that lender – you can swap to another later if you find a lower rate.)
  3.  Shop around with a few lenders: Request quotes from at least 4 lenders plus your existing lender (if any), your bank or credit union and any mortgage brokers you have relationships with 
  4. Compare the quotes you get: We’ll show you how to compare loan estimates and find the best mortgage rate below
  5. Commit to a Lender: Choose your preferred lender, fill out your mortgage application, and stay on top of admin until closing 
  6. Don’t make any life changes until closing: Try to avoid jobs or becoming unemployed, if at all possible. Don’t open or close credit accounts or go on debt fueled spending sprees. Any of those could reduce your credit score and lenders will routinely check your credit score before closing 

Loan Programs

You’ll need to evaluate your options to decide which type of mortgage loan would best suit your needs. A few things to keep in mind include:

  • Conventional vs. government-backed. There are two main types of mortgage loans. The first is a conventional mortgage, which means it’s provided by a private bank, credit union or online lender. These loans tend to have fairly strict eligibility requirements and higher down payments.
  • If your credit isn’t in great shape and/or you haven’t saved up much for a down payment, you may still be able to buy a home through a government-backed mortgage such as an FHA loan or VA loan. These loans are still borrowed through individual lenders, but the funds are insured by the federal government. This makes these loans much less risky to the banks providing them, allowing you to secure more flexible terms.
  • Fixed vs. variable interest rate. Another big consideration is choosing between an interest rate that’s fixed for the entire term of your loan or one that can vary. Fixed-rate loans are generally a safe bet, as you know exactly how much your mortgage payment will be each month. Variable rates tend to be less expensive in the first few years of the loans. However, the rate will reset one or multiple times throughout the loan term according to the current market. That means your interest rate could increase in the future, causing your mortgage payments to become unaffordable.
  • Shorter vs. longer term. Finally, consider how the length of your loan will impact the cost. On one hand, a shorter loan of 15 or 20 years will allow you to pay off your loan faster and save money on interest charges. However, that also means the monthly payments will be much higher, stifling some of your cash flow.

On the other hand, you could extend the loan term out to 30 years or longer. That would help make the monthly payments more affordable and even allow you to borrow more. But by increasing the number of years you spend paying back the loan, you also increase the amount of interest paid over time.

Down Payments/ Down Payment Assistance Programs

When you meet with your lender to become pre-approved, also ask them if there are any down payment assistance programs that you may qualify for. There are hundreds of different programs throughout the country.

Eligibility requirements vary depending on your location, and are generally limited to first- time and/ or low- and moderate-income homebuyers. Several programs specifically benefit veterans, Native Americans, and workers employed in education, health care, law enforcement, and firefighting.

Mortgage Payment depends on your INCOME

Mortgage Payment depends on your INCOME

  •  Knowing you want to buy a home is one thing; knowing how much of a mortgage payment you can handle is quite another. So how do you pinpoint a house where the monthly mortgage payment is financially within your reach, and one that won’t drive you deep into debt? 
  • Getting a ballpark estimate of how much house you can afford starts with looking at your income, or how much money you’re pulling in.
  • The general rule of thumb is that you can purchase a home that costs two or three times your annual income. 
  • So if you’re earning $80,000 per year (and you have a reasonable amount of job security and don’t expect wild fluctuations in your income anytime soon), you can afford a house up to three times that, or $240,000.
  • That said, income isn’t everything, and this is just a ballpark figure to get you started

Roles in the Real Estate Process

Real estate agent– professionals, that assist people who want to sell and buy a house, their pay is based off commission

Loan officer/ mortgage broker– will tell you what you can and can not afford, will tell you if you qualify for a loan, will gather documents regarding all your income.  

Loan Processor– will be paid in your closing costs, loan processor double checks all the financial and employment information the loan office gathered from you. 

Underwriter– gives final approval for a loan, makes sure you are a good credit risk for a loan

Appraiser– Loan officer will ask an appraiser to get an opinion of the value of the home you’re trying to buy. Appraiser will look at house and compare it to other nearby properties, 

Home inspector- will deeply inspect the property, crawl in the attic and look at everything to point out any contingencies. 

Attorney– their job is to protect your rights and interests. 

Closing Agent:  makes sure that all of the buyer and sellers documents are in order agreed upon, and signed on the date of closing.

What type of home are you looking for?

Do you want a move-in ready house or a fixer upper that offers you some projects, do you want the convenience of a condominium unit or a townhouse where you can avoid the hassles of yard work and other maintenance.

Older homes will usually have some old charm to them with nooks and crannies and hardwood floors, a huge pro about old homes is their construction. They were made with higher quality materials. You will not have to worry about the walls cracking due to it already being settled in the foundation. Can have cons like older appliances, water pipers, insulation, heating, carpet and wallpaper. Older homes also tend to be less expensive. 

New Homes can be in custom built or a tract built. Custom is built to suit one person’s style while tract is built to suit everyone’s style. New houses may have a better chance of increasing value because they are built in areas where population is expected to grow. The layout of the new houses are open and with high ceilings, they are also energy efficient. These houses are cookie cutter, and flimsier due to cheaper materials. 

Condo and townhomes give you a worry free lifestyle of renting with the financial benefits of owning. These usually cost less, part of a community of similar units with common spaces.

Where do you want to live?

To be happy in your new house you want to make sure that it is in the neighborhood that will suit your needs. Is it safe? How is the traffic nearby? Is there a long or short commute to work? If you have kids are there schools nearby? Are the schools nice with good morals? How are the culture and religious organizations near by, do they fit your views?

Advantages/Disadvantages of Buying a Home


  • You’ll likely be building home equity with every mortgage payment 
  • Steady monthly fixed rate mortgage costs can help you to predict expenses in the long term
  • You may be able to take advantage of mortgage interest tax deduction and other tax benefits
  • Owning a home affords you more privacy than renting an apartment
  • You’ll have the ability to decorate and alter the home to your tastes
  • You can own pets without having to worry about landlord rules and added fees
  • Home value may increase over time if the market you buy in is getting more valuable over time 


  • Costs for home maintenance and repairs can impact savings quickly 
  • A longer commitment will be required vs. renting
  • Mortgage payments can be higher than rental payments
  • Money needed upfront to buy the home can be hard to pull together