If you’re applying for any type of mortgage, it’s likely you’ll hear the term ‘underwriting’. But what does this actually mean? We look at who underwrites a mortgage, what this entails, and why it’s key to securing home finance.
What is mortgage underwriting?
Underwriting is the process during which your mortgage application is scrutinised against the evidence you’ve provided to support your application. This is to ensure that you can realistically make and maintain mortgage mortgage repayments throughout the loan term.
The mortgage underwriters’ recommendation is passed to the lender to confirm whether or not they think that your application carries an acceptable level of risk. The lender will then make their decision to approve your mortgage or not based on these findings.
Not all mortgage lenders use external underwriters, as some underwrite their own products. However, more complex and higher risk applications will usually be passed to professional underwriters. This might be if you’re borrowing at a high LTV (loan-to-value) ratio, have bad credit, your property is considered a risky investment, or you have non-standard income.
What the process involves
The process consists of the following steps:
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Affordability assessment - an in-depth review of your finances and review of supporting documents, such as payslips and bank statements
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Full detailed credit checks - this will be a full and thorough search of your credit file which leaves an imprint, in addition to the soft search that was likely carried out at the agreement in principle stage
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Policy checks - this is a thorough check of the mortgage lender’s criteria to ensure you meet all requirements, such as age, property type etc
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Fraud checks - proof of deposit will be checked as well as the authenticity of any overseas income etc
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Property evaluation - the surveyor’s valuation will be checked thoroughly to ensure construction materials, age of the property and any defects are fully considered
How long does it take?
More straightforward applications tend to be quicker, sometimes in as little as a week. However, each stage can take 1-2 weeks at busier times of year. Manual underwriting tends to take longer than this, and can be slower the more complex the application.
What to do if your mortgage is declined at underwriting
It depends why it’s been declined. Mortgage applications can take a few months, so if there have been changes in your circumstances since the initial application, or you have missing documentation, this could cause underwriters to reject your mortgage.
In cases like this, it may be possible to make a few changes in order to satisfy the underwriters, such as providing missing information or getting a new valuation of the property. If you’re unable to resolve the issues due to not meeting the lender’s criteria, it’s a good idea to speak to mortgage brokers, like ourselves. It’s possible that we could recommend more flexible lenders that may be able to help.
Get in touch if your mortgage was declined during underwriting and we will have one of our mortgage advisers explore your options with you.
FAQs
Manual underwriting is exactly as it sounds, the same underwriting process is carried out, but entirely by a human specialising in underwriting. This is slower than automated underwriting, but is often necessary on higher risk applications.
