What does it mean when your mortgage request goes into underwriting and who is the underwriter?
Underwriting is one of the most important functions in the financial world wherein the process of underwriting reviews and evaluates the risk associated with a venture, an investment, or a loan. Underwriters are not only found in banking, but also within insurance, and stock markets.
With regards to mortgage lending, underwriters are financial experts, who review your finances, the property, and the 5 C’s of credit and assess how much risk a lender will take on, if they decide to give you a loan. Essentially they are viewing the application as a whole and being the decision makers to a loan request. An underwriter takes on the responsibility to ensure that the decision to lend, is a good one and so they must scrutinize a file very carefully.
In the process of a mortgage application, once the application is submitted, it goes to the lenders underwriting department, where it is assigned an underwriter. The underwriter will review the property, and the application, supported by documents and decide if your file fits within the lenders/banks guidelines. Sometimes a file does not exactly fit, and in this case will be assessed to see if the risk is worth an exception to the guidelines. Often exceptions may need further approval from the head office or further up the command chain, and may require an extra few days to give time for the consideration.
It is important to note that a pre-approval is not submitted to an underwriting center because in order to submit to a mortgage lender; there must be a property as the property is a major part of the lending decision. In a purchase transaction- once there is an accepted offer, then the file can be prepared to send to the mortgage lender for approval.