What is a Mortgage Underwriter and Why Does She Want My Soul?

Model in the gates of hell.

You may have to give up your tax returns, bank statements, and first-born child to get a mortgage. But probably not your immortal soul.

You’ve gathered every piece of paper you can find: your pay stubs, tax returns, and your second cousin’s birth certificate. And still, you’re getting calls from your mortgage lender asking for just one more piece of information.

Who is this underwriter he keeps talking about and why doesn’t she want you to buy a house? Will she rest before you’ve turned over your very soul?

Who Gives You a Mortgage?

You probably only meet with one person in relation to your mortgage. Or, if your lender has an online application process, you may never see a warm body until closing.

But an entire team of people works to get you a mortgage. Maybe if you meet some of the players, the process will make more sense. And be less scary.

Mortgage Broker

In many markets, a home buyer meets with a mortgage broker.

A mortgage broker has relationships with several lenders. When you meet with him for a preapproval, he’ll pull your credit and collect some basic documents (bank statements, tax returns, pay stubs etc.).

He then compares your financial stats with the standards of the lenders he works with. Or he’ll send some basic information out to his contacts and ask who has a mortgage to offer you.

If you appear to fit the standards of one or more of the lenders, the broker will tell you the terms of the mortgages—interest rate, length, special conditions so you can choose the one that’s best for you.

When you make an application, the mortgage broker will forward your complete information to the lender so they can process it.

Mortgage Originator

In some areas, home buyers meet directly with someone who works for a bank or credit union. There is no mortgage broker.

A mortgage originator might also be known as a loan officer or mortgage officer. Just like the mortgage broker, they will also pull your credit and start collecting documents from you.

But the mortgage originator knows what types of mortgage his bank or credit union offers and can usually tell you quickly if you’re likely to qualify for one of their mortgages.

When you fill out a mortgage application, the originator will forward your information to the company’s processor.

Mortgage Processor

The mortgage processor is very low on the chain of command. Which means she is extremely important. If you talk to a mortgage processor, treat her nice. She has to deal with lots of yucky paper and files just so you can buy the house you want.

The processor goes over the paperwork to make sure it’s complete. Are there bank statements going back three months for all accounts? Is there a gift letter for money your parents are giving you for down payment? Are your tax returns signed?

If the mortgage processors sees anything missing from her checklist, she may call you (or ask the mortgage originator to call you) to provide more papers.

Mortgage processors are usually very organized people. They have to be. Or they get yelled at by their underwriters.

Mortgage Underwriter

The mortgage underwriter makes the final decision about whether your income, credit, and assets are good enough to qualify for a particular loan.

They know more about the rules for every mortgage a lender offers than anyone.

And who makes these rules? Well lots of loans are sold to investors on the secondary market. And those investors make the rules about the kinds of loans they’re willing to buy.

Anyway, if a mortgage lender keeps your mortgage or sells it to someone else, there are standards for each loan that you have to fit if you want a loan approval. And if there is a rule that can be interpreted different ways, the underwriter makes the interpretation.

But first, she might ask you for more information so she can make a decision.

Glinda the Good Witch helps Dorothy go home.

Although it can feel like your underwriter is asking you for everything, she might really just be helping you find your way home.

Blame the Underwriter

Whenever anyone asks you for more paperwork, they always blame the underwriter.

And if you get frustrated by having to provide more and more information to attach to your application, you can blame her too. Go ahead and curse her in your car.

But not too much.

Because the underwriter is supposed to approve mortgages that won’t lose the lender money (like if they had to foreclose). So a loan that is good for the bank is also good for you.

So if you get a mortgage that you feel comfortable paying every month, you might want to kiss your underwriter. I promise you. She won’t try to steal your soul.

Your Turn: Have you interacted with any of these mortgage professionals? Did they explain to you why they needed the paperwork they needed?

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photo credits: Gates of Hell by country_boy_shane via photopin cc. The Good Witch: twm1340 via photopin cc. Click images to learn more about the photographers.

Comments

  1. I have been working with the underwriter for months now. This is my first home purchase. She keeps asking for more and more documents. I first was approved for more, then I moved to another state so my income changed a little but still stable. I have cleaned up the 2 things in error on my report. She just keeps dragging this out. I’m going on my 3rd house now. Because the others fell through because this has dragged out so long. The last thing she said to me recently is before you make an offer on this house make sure you put a contingency that you will get earnest money back. What does this mean? Is she going to finally put through or not. The loan amount is only 52,000. Its not like a huge loan. I don’t know what to do anymore. I am living with friends and I’m so frustrated at this point.

    • Sorry your experience has been so frustrating.

      It sounds like your lender isn’t really hopeful about your getting an approval since she mentioned making sure your contract had a financing contingency to protect you if your loan isn’t approved.

      Without knowing all your details, I can’t tell you what’s holding you back here. But do you live somewhere that you could get help from a nonprofit agency that helps homeowners?

      Here’s one website you can check: http://www.nw.org/network/Utilities/NWOLookup.asp. And here’s another: http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm. I’d strongly recommend you talk to someone independent who can help you figure out what’s going on and if you’re actually ready to buy a house.

      Good luck.

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